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    • worlestone
    • By worlestone 14th Mar 18, 8:15 PM
    • 13Posts
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    worlestone
    IFA fees
    • #1
    • 14th Mar 18, 8:15 PM
    IFA fees 14th Mar 18 at 8:15 PM
    Hi,

    Could someone shed some light on IFA fees please.

    I've had an initial meeting with an IFA to discuss potential retirement plans and get some idea of what's possible. I'm 56, looking to retire at 60, and have a couple of DB local government pensions which will pay approximately £5,000 each at 60. I also have a DC pension which stands at £375,000, this is primarily what the IFA is interested in helping invest.

    The fees are tiered, 2% first 100k, 1% next 200K and 0.5% £200k+, approx £5,000 in first year, equating to 1.8% + an additional 0.5%, then each subsequent year an annual management fee of 1.5% plus VAT

    Is this a normal/reasonable charge? I have nothing to compare it with

    Thanks in advance
Page 1
    • EdGasketTheSecond
    • By EdGasketTheSecond 14th Mar 18, 8:52 PM
    • 581 Posts
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    EdGasketTheSecond
    • #2
    • 14th Mar 18, 8:52 PM
    • #2
    • 14th Mar 18, 8:52 PM
    So his advice has to return at least 2.3% and then 1.5% better than what you could do on your own to justify the fees. As you are retiring soon I wouldn't have thought there'd be much option for your £375K as you wouldn't want to take risk with much of it. You could invest it yourself in a combination of short-dated gilts or gilt fund, short-dated corporate bond fund (e.g. iSHares IS15) and maybe 10 to 20% in a worldwide equity fund like a Vanguard ETF with low charges or iShares core fund. Think about drawing out each year from 60 to 66 to maximise what you can take tax-free (UFPLS) unless you need the 25% tax-free lump sum in one go.

    If the IFA's investments lose money then you still lose the IFA's percentage as well on top of your investment loss.
    • dunstonh
    • By dunstonh 14th Mar 18, 8:53 PM
    • 92,974 Posts
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    dunstonh
    • #3
    • 14th Mar 18, 8:53 PM
    • #3
    • 14th Mar 18, 8:53 PM
    then each subsequent year an annual management fee of 1.5% plus VAT
    Vat is not normally charged. If there is a discretionary investment element, then that bit is vatable but the rest shouldnt be. If there is no discretionary investment involved, then its normally all non vatable.

    The initial charge is not unreasonable. Its in the upper of reasonable. We see a lot worse (such as SJP charging 5% initial) but you can also get better. What is that "additional" 0.5% for?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • xylophone
    • By xylophone 14th Mar 18, 8:56 PM
    • 25,561 Posts
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    xylophone
    • #4
    • 14th Mar 18, 8:56 PM
    • #4
    • 14th Mar 18, 8:56 PM
    Who is currently managing the pension?
    • Brynsam
    • By Brynsam 14th Mar 18, 9:07 PM
    • 1,134 Posts
    • 768 Thanks
    Brynsam
    • #5
    • 14th Mar 18, 9:07 PM
    • #5
    • 14th Mar 18, 9:07 PM
    'I also have a DC pension which stands at £375,000, this is primarily what the IFA is interested in helping invest.'

    Never mind what the IFA is interested in doing, what do you want them to do? The way you've phrased that speaks volumes! Sounds pretty pricey for not much work.
    • Daniel54
    • By Daniel54 14th Mar 18, 9:32 PM
    • 605 Posts
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    Daniel54
    • #6
    • 14th Mar 18, 9:32 PM
    • #6
    • 14th Mar 18, 9:32 PM
    Looks a bit expensive to me. I paid 1% of the DC pension ( approx £ 2,500 )for the initial report,which covered the DB and D.C. pensions as well as all my other assets in terms of retirement and estate planning .Ongoing servicing is 0.5% of the SIPP which also covers regular catch ups and ongoing advice/ guidance in respect of investment and inheritance planning ( and anything else I need a second pair of eyes on).This was agreed 4 years ago ,which is not long ago.
    Last edited by Daniel54; 14-03-2018 at 9:37 PM.
    • Daniel54
    • By Daniel54 14th Mar 18, 9:58 PM
    • 605 Posts
    • 707 Thanks
    Daniel54
    • #7
    • 14th Mar 18, 9:58 PM
    • #7
    • 14th Mar 18, 9:58 PM
    So his advice has to return at least 2.3% and then 1.5% better than what you could do on your own to justify the fees. As you are retiring soon I wouldn't have thought there'd be much option for your £375K as you wouldn't want to take risk with much of it. You could invest it yourself in a combination of short-dated gilts or gilt fund, short-dated corporate bond fund (e.g. iSHares IS15) and maybe 10 to 20% in a worldwide equity fund like a Vanguard ETF with low charges or iShares core fund. Think about drawing out each year from 60 to 66 to maximise what you can take tax-free (UFPLS) unless you need the 25% tax-free lump sum in one go.

    If the IFA's investments lose money then you still lose the IFA's percentage as well on top of your investment loss.
    Originally posted by EdGasketTheSecond
    The OP has £10k of DB income at age 60 plus their state pension at 67. The interaction between these guaranteed income streams and their DC pension warrants in my view detailed and personalised advice from an IFA ,rather than an investment plan based solely on costs and somewhat plucked out of the air.

    My personal view is that trackers have a much greater role in accumulation than decumulation,when income and capital preservation become higher as priorities in terms of long term planning
    • westv
    • By westv 14th Mar 18, 10:34 PM
    • 4,542 Posts
    • 2,138 Thanks
    westv
    • #8
    • 14th Mar 18, 10:34 PM
    • #8
    • 14th Mar 18, 10:34 PM
    Remember of course that should the pension pot decline in value over the years the fees will too but your income should, hopefully, increase.
    • tacpot12
    • By tacpot12 15th Mar 18, 1:27 AM
    • 1,036 Posts
    • 878 Thanks
    tacpot12
    • #9
    • 15th Mar 18, 1:27 AM
    • #9
    • 15th Mar 18, 1:27 AM
    I'm paying about £400 pa in platform fees to self-manage a SIPP portfolio of c£375k. I also pay about £2000 in fund management charges via the fund AMCs, but I bet the IFA costs exclude any fund manage charges -something else to check.

    If the IFA has excluded Fund Management Cgarhes, then they are proposing to charge you about £6500 pa for the same service that I provide to myself for £400. This means that their advice has to produce £6100 more income per annum to avoid costing you money over the DIY option.
    Last edited by tacpot12; 15-03-2018 at 1:36 AM.
    • Joey Soap
    • By Joey Soap 15th Mar 18, 1:49 AM
    • 159 Posts
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    Joey Soap
    Typically, these guys roll up at your house driving a E class Mercedes. Ask him where his customer's Mercedes E class are. You'll never have one if you're giving away your money like that, for certain.
    • Joey Soap
    • By Joey Soap 15th Mar 18, 1:50 AM
    • 159 Posts
    • 50 Thanks
    Joey Soap
    I'm paying about £400 pa in platform fees to self-manage a SIPP portfolio of c£375k. I also pay about £2000 in fund management charges via the fund AMCs, but I bet the IFA costs exclude any fund manage charges -something else to check.

    If the IFA has excluded Fund Management Cgarhes, then they are proposing to charge you about £6500 pa for the same service that I provide to myself for £400. This means that their advice has to produce £6100 more income per annum to avoid costing you money over the DIY option.
    Originally posted by tacpot12
    Yes, and we all know, that just isn't going to happen, don't we?
    • Audaxer
    • By Audaxer 15th Mar 18, 8:55 AM
    • 1,080 Posts
    • 634 Thanks
    Audaxer
    I'm paying about £400 pa in platform fees to self-manage a SIPP portfolio of c£375k. I also pay about £2000 in fund management charges via the fund AMCs, but I bet the IFA costs exclude any fund manage charges -something else to check.

    If the IFA has excluded Fund Management Cgarhes, then they are proposing to charge you about £6500 pa for the same service that I provide to myself for £400. This means that their advice has to produce £6100 more income per annum to avoid costing you money over the DIY option.
    Originally posted by tacpot12
    I agree that it is a lot cheaper to go down the DIY route, but not everyone has the confidence and knowledge to manage a portfolio of £375k themselves. In these cases it would be worth going through a good IFA with reasonable costs.

    £400 pa in platform charges is really cheap for a portfolio of that size. Do you mind me asking what platform you have your SIPP on?
    • Credit-Crunched
    • By Credit-Crunched 15th Mar 18, 9:04 AM
    • 2,106 Posts
    • 4,132 Thanks
    Credit-Crunched
    I'm paying about £400 pa in platform fees to self-manage a SIPP portfolio of c£375k. I also pay about £2000 in fund management charges via the fund AMCs, but I bet the IFA costs exclude any fund manage charges -something else to check.

    If the IFA has excluded Fund Management Cgarhes, then they are proposing to charge you about £6500 pa for the same service that I provide to myself for £400. This means that their advice has to produce £6100 more income per annum to avoid costing you money over the DIY option.
    Originally posted by tacpot12
    That is a very simplistic route of looking at it, I could in theory service my own car on an annual basis and only pay for the parts, thus saving on garage markup and labour.

    Do I have the skill level or the inclination to do it, or is it more cost effective someone who knows what they are doing carry it out. It will take less time, and if I have any issues I don't have to spend my weekends and evening tinkering, I can just take the car to the garage.

    It is not all about costs for some, for some people the peace of mind knowing that they do not have to analyse morning star or calculate their annual allowances for draw down is worth the extra %. In my retirement, I want to enjoy my time and monitoring spreadsheets is not my idea of fun!

    It is horses for course, but I feel that sometimes working purely on costs is disingenuous to the question
    • Credit-Crunched
    • By Credit-Crunched 15th Mar 18, 9:06 AM
    • 2,106 Posts
    • 4,132 Thanks
    Credit-Crunched
    I agree that it is a lot cheaper to go down the DIY route, but not everyone has the confidence and knowledge to manage a portfolio of £375k themselves. In these cases it would be worth going through a good IFA with reasonable costs.

    £400 pa in platform charges is really cheap for a portfolio of that size. Do you mind me asking what platform you have your SIPP on?
    Originally posted by Audaxer
    I agree 0.1% is a great rate? Who is this with
    • dunstonh
    • By dunstonh 15th Mar 18, 11:23 AM
    • 92,974 Posts
    • 60,354 Thanks
    dunstonh
    Typically, these guys roll up at your house driving a E class Mercedes. Ask him where his customer's Mercedes E class are. You'll never have one if you're giving away your money like that, for certain.
    Originally posted by Joey Soap
    Are you really still jealous of others that work hard to get to where they are? You could you have more if you worked harder.

    Plus, the Mercedes E class is only around £35k. It's hardly an expensive car.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • xylophone
    • By xylophone 15th Mar 18, 4:02 PM
    • 25,561 Posts
    • 15,096 Thanks
    xylophone
    You could you have more if you worked harder.

    Plus, the Mercedes E class is only around £35k. It's hardly an expensive car.
    There are only a certain number of hours available for work - 24 a day if you never stop ...

    It seems to me that you should remember that for many, many people the cost of £35,000 would indeed represent an "expensive" car and for very many others that sum represents more than they could hope to earn in a year......
    • dunstonh
    • By dunstonh 15th Mar 18, 4:21 PM
    • 92,974 Posts
    • 60,354 Thanks
    dunstonh
    There are only a certain number of hours available for work - 24 a day if you never stop ...

    It seems to me that you should remember that for many, many people the cost of £35,000 would indeed represent an "expensive" car and for very many others that sum represents more than they could hope to earn in a year......
    Originally posted by xylophone
    Does that allow them to be rude about people that can afford it?

    And, if you recall the other thread where JS displayed his jealousy, he measured the individual by their car. The more expensive the car, the lesser they were as a person.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • xylophone
    • By xylophone 15th Mar 18, 4:33 PM
    • 25,561 Posts
    • 15,096 Thanks
    xylophone
    Does that allow them to be rude about people that can afford it?
    No, certainly not but who said that it did?

    And, if you recall the other thread where JS displayed his jealousy, he measured the individual by their car. The more expensive the car, the lesser they were as a person.
    But two wrongs don't make a right?
    • fred246
    • By fred246 16th Mar 18, 4:12 AM
    • 975 Posts
    • 532 Thanks
    fred246
    I am a well paid professional person. Well paid people always have financial advisers buzzing around them. I remember a meeting when one adviser was telling us that they were no longer allowed to be paid commission but had to work hourly. "I charge a very competitive £200 an hour". I remember watching us all splutter. It was rare for us to get paid that amount.
    They seem to have got around it by charging a percentage like estate agents. "I'll take a few photos and put it on a website. That will be £4K" sounds awful. 1% commission doesn't sound bad.
    • bowlhead99
    • By bowlhead99 16th Mar 18, 4:52 AM
    • 7,974 Posts
    • 14,510 Thanks
    bowlhead99
    I am a well paid professional person. Well paid people always have financial advisers buzzing around them. I remember a meeting when one adviser was telling us that they were no longer allowed to be paid commission but had to work hourly. "I charge a very competitive £200 an hour". I remember watching us all splutter.
    Originally posted by fred246
    The adviser claimed his rate was competitive. You spluttered at his rate. What was the rate being charged by the other professional advisers with whom he was competing? If the market rate was £100, you are right, £200 is not a competitive rate, and you were right to splutter. But I suspect the market rate for regulated financial advice was not as low as £100.

    It was rare for us to get paid that amount.
    Don't confuse what you get paid, with what the business needs to charge for its services during its chargeable hours to get enough money in the door to pay you what you get paid plus employer's NI (and other costs of employment), renting or maintaining an office and other premises costs, training, infrastructure / technology, support staff and any employees or management in the background who are not getting charged out at a rate per hour, regulatory compliance, sales and marketing etc and a profit margin to compensate the owners of the business for their capital tied up in the business and the risks that the income doesn't cover the outgoings.

    I don't earn anything like as much as £200ph but my employer couldn't afford to employ me if they could only charge me out at as little as £200ph.
    Last edited by bowlhead99; 16-03-2018 at 4:54 AM.
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