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  • FIRST POST
    • daisyrose
    • By daisyrose 15th Apr 19, 10:58 PM
    • 102Posts
    • 14Thanks
    daisyrose
    Do we need a ifa?
    • #1
    • 15th Apr 19, 10:58 PM
    Do we need a ifa? 15th Apr 19 at 10:58 PM
    What is the best way to start taking an income from a sipp? We have a fa and I have been searching for a ifa but dont know what to look out for and cant get any recommendations from anyone we know
    From an earlier post I have found that all fees together are too high so we need to make changes
    I'm interested to know how others take their income and what is the most cost effective way? Do we need a ifa?
    Thanks in advance.
Page 1
    • dunstonh
    • By dunstonh 15th Apr 19, 11:59 PM
    • 97,975 Posts
    • 66,132 Thanks
    dunstonh
    • #2
    • 15th Apr 19, 11:59 PM
    • #2
    • 15th Apr 19, 11:59 PM
    Do we need a ifa?
    Its like any job. You can DIY or use a professional. DIY well and it can be cost effective. DIY badly and it can be a costly error.

    I'm interested to know how others take their income
    Are you referring to the drawdown strategies or the investment strategies?
    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.
    • beamyup
    • By beamyup 16th Apr 19, 6:39 AM
    • 50 Posts
    • 14 Thanks
    beamyup
    • #3
    • 16th Apr 19, 6:39 AM
    • #3
    • 16th Apr 19, 6:39 AM
    So long as you are not overly optimistic on your drawdown then DIY should not be a problem.

    In my opinion costs are very important. DIY is a very good way to reduce costs.

    If you can find a good IFA they can probably also reduce some of your costs but will add a huge chunk of costs by way of their own fees.

    You can search for a good value and easy to use SIPP drawdown provider that suits you from the big names. the charges should be low. Personally, I plan to use AJBELL. this may help. https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/income-drawdown/compare-pension-drawdown-plans-and-charges-ax1628r13rdk

    You can then drawdown simply and efficiently in whatever way you prefer.

    If you want to provide a lot more detail about your situation then more detailed suggestions will be offered.
    • crv1963
    • By crv1963 16th Apr 19, 7:16 AM
    • 784 Posts
    • 1,798 Thanks
    crv1963
    • #4
    • 16th Apr 19, 7:16 AM
    • #4
    • 16th Apr 19, 7:16 AM
    I think a lot depends on your confidence. I feel confident that I could manage my own drawdown process but I also know that Mrs CRV would be horrified at having to do this.

    So for us an IFA to help manage the process will when the time comes be worth the cost for the peace of mind.

    As my wife says to me "Just because you have a set of spanners and know what they are for- it doesn't make you a mechanic!".
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • dunstonh
    • By dunstonh 16th Apr 19, 8:22 AM
    • 97,975 Posts
    • 66,132 Thanks
    dunstonh
    • #5
    • 16th Apr 19, 8:22 AM
    • #5
    • 16th Apr 19, 8:22 AM
    In my opinion costs are very important. DIY is a very good way to reduce costs.
    DIY can also increase your costs. It isnt whether you DIY or not that saves you money. It is how you DIY. Two of HL's top 10 selling funds are their own brand very expensive funds. This means a high proportion of their DIY investors are paying more than they would by using an IFA.
    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.
    • sandsy
    • By sandsy 16th Apr 19, 11:08 AM
    • 1,456 Posts
    • 889 Thanks
    sandsy
    • #6
    • 16th Apr 19, 11:08 AM
    • #6
    • 16th Apr 19, 11:08 AM
    Don't worry about recommendations. If someone likes their adviser they'll tell you they're good, even if they don't know if they are.

    Try: https://adviserbook.co.uk/

    Make sure you tick the box 'confirmed independent'.

    You should talk to 2 or 3 before you commit to one. See if you like them and if you would feel comfortable working with them. Do they seem to be just a salesman or someone who is interested in helping you achieve the best you can in a way which suits you? Ask about advice charges and what service you actually receive for the money you would pay - not only upfront but ongoing too. Trust your instinct.
    • daisyrose
    • By daisyrose 16th Apr 19, 10:55 PM
    • 102 Posts
    • 14 Thanks
    daisyrose
    • #7
    • 16th Apr 19, 10:55 PM
    • #7
    • 16th Apr 19, 10:55 PM
    Thank you all for your comments I have found them interesting and you have high lighted some things that I haven't thought of. I'm not at all confident about diy I dont know enough about how it all works and fully agree with Mrs CRV. With the strategies are there any alternatives to drawdown and annuities? Would you stick with the current sipp provider or shop around before drawdown?
    • AnotherJoe
    • By AnotherJoe 17th Apr 19, 6:18 AM
    • 13,437 Posts
    • 15,888 Thanks
    AnotherJoe
    • #8
    • 17th Apr 19, 6:18 AM
    • #8
    • 17th Apr 19, 6:18 AM
    Thank you all for your comments I have found them interesting and you have high lighted some things that I haven't thought of. I'm not at all confident about diy I dont know enough about how it all works and fully agree with Mrs CRV. With the strategies are there any alternatives to drawdown and annuities? Would you stick with the current sipp provider or shop around before drawdown?
    Originally posted by daisyrose
    Well that would depend on the current SIPP provider about which we know nothing.
    No there aren't really alternatives to drawdown or annuity but there are numerous drawdown strategies depending upon your other financial circumstances and there are also different types of annuities and it doesn't have to be one or the other you can mix and match or start with drawdown and then move to annuity (becaus annuities tends to be better value as you get older). Health also comes into it.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • OldMusicGuy
    • By OldMusicGuy 17th Apr 19, 8:08 AM
    • 893 Posts
    • 1,940 Thanks
    OldMusicGuy
    • #9
    • 17th Apr 19, 8:08 AM
    • #9
    • 17th Apr 19, 8:08 AM
    It's not that complicated to DIY. Before paying a lot of money to someone else to do it for you, I suggest you do a bit of reading first. This book is often recommended on here: DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning, by John Edwards. Well worth a read before you decide which way to go.

    I'll disagree with Mrs CRV somewhat. Just because a guy with some spanners calls himself a mechanic, it doesn't always mean he's any good, nor does it mean he won't overcharge you for poor or indifferent service. I have encountered some garages and mechanics over the years that have not been up to the job. Similarly I know of a fully accredited IFA that defrauded his clients (of course, not all mechanics and IFAs are like this, but some are).
    Last edited by OldMusicGuy; 17-04-2019 at 8:10 AM.
    • dunstonh
    • By dunstonh 17th Apr 19, 10:30 AM
    • 97,975 Posts
    • 66,132 Thanks
    dunstonh
    Anyone that claims perfection in any industry or profession is deluded. Every area has bad apples. IFAs are responsible for millions of pension transactions a year. Yet the latest FOS complaint stats show that just 1678 complaints were made against IFAs in 2017/18. 271 of them for stuff over 15 years ago (notable as there were big changes in the period since). And just 451 were on pensions. 365 of the overall number were not to do with advice but administration. Complaints against IFAs have been falling nearly every year.

    The main areas of concern are factory line services (firms set up to do a transaction on a quick turnover basis), unregulated investments (again, a small number and mostly used by cold callers and again, factory line type services) and firms that phoenix. i.e. set up under one name, trade badly for a couple of years, close the limited company and then set up a new company repeating the stuff before but dumping liability on the FSCS each time.

    A localised firm with a history that relies on local reputation within the area is usually the safest method.
    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.
    • crv1963
    • By crv1963 17th Apr 19, 10:52 AM
    • 784 Posts
    • 1,798 Thanks
    crv1963
    It's not that complicated to DIY. Before paying a lot of money to someone else to do it for you, I suggest you do a bit of reading first. This book is often recommended on here: DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning, by John Edwards. Well worth a read before you decide which way to go.

    I'll disagree with Mrs CRV somewhat.
    Originally posted by OldMusicGuy
    I agree OMG, I feel I could do this reasonably but my point was that for Mrs CRV doing it would be stressful and cause sleepless nights. Therefore for us as a couple the costs of an IFA to give advice would be worth it.

    It is a case of each doing what they are most comfortable with.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • daisyrose
    • By daisyrose 19th Apr 19, 2:23 PM
    • 102 Posts
    • 14 Thanks
    daisyrose
    Thank you all for your comments. I will have a look at the links and reading suggestions. I understand that different fund values affect the charges but what is the average percentage charge people are comfortable with both with and without using a ifa?
    • bostonerimus
    • By bostonerimus 19th Apr 19, 4:01 PM
    • 2,817 Posts
    • 2,134 Thanks
    bostonerimus
    Thank you all for your comments. I will have a look at the links and reading suggestions. I understand that different fund values affect the charges but what is the average percentage charge people are comfortable with both with and without using a ifa?
    Originally posted by daisyrose
    The rule of thumb is that with a reasonably priced advisor you'll probably pay between 0.5% and 1% more in fees each year than if you DIY. Now if you consider that you might withdraw between 3% and 4% of your pot each year to live on those fees could start out as around a quarter of your annual spending. Some people like an advisor and feel that they add value and others prefer to DIY. Do your research before making a decision.

    Then you have to consider platform, transaction and fund fees.
    Misanthrope in search of similar for mutual loathing
    • Linton
    • By Linton 19th Apr 19, 4:32 PM
    • 10,584 Posts
    • 10,936 Thanks
    Linton
    The rule of thumb is that with a reasonably priced advisor you'll probably pay between 0.5% and 1% more in fees each year than if you DIY. Now if you consider that you might withdraw between 3% and 4% of your pot each year to live on those fees could start out as around a quarter of your annual spending. Some people like an advisor and feel that they add value and others prefer to DIY. Do your research before making a decision.

    Then you have to consider platform, transaction and fund fees.
    Originally posted by bostonerimus

    On the other hand choosing fund A rather than fund B or drawing down too much or too little could have a much larger effect. So it all depends on how confident you feel in choosing funds and managing your drawdown strategy. If you are not confident you could start with an IFA and take over once you feel ready.
    • zagfles
    • By zagfles 19th Apr 19, 4:36 PM
    • 14,071 Posts
    • 12,178 Thanks
    zagfles
    DIY can also increase your costs. It isnt whether you DIY or not that saves you money. It is how you DIY. Two of HL's top 10 selling funds are their own brand very expensive funds. This means a high proportion of their DIY investors are paying more than they would by using an IFA.
    Originally posted by dunstonh
    How do you know? The IFA might buy an expensive multi asset fund and end up with total charges around 2% as you've just been discussing in another thread. I don't think even HL's more expensive funds plus platform fee come to 2%.
    • Prism
    • By Prism 19th Apr 19, 4:47 PM
    • 772 Posts
    • 604 Thanks
    Prism
    The average DIY investor (at least in the US) significantly underperforms the index year after year. An IFA doesn't especially have to beat the market - just what an inexperienced investor would do otherwise

    As an example https://www.dalbar.com/Portals/dalbar/Cache/News/PressReleases/QAIBPressRelease_2019.pdf
    • bostonerimus
    • By bostonerimus 19th Apr 19, 5:19 PM
    • 2,817 Posts
    • 2,134 Thanks
    bostonerimus
    The average DIY investor (at least in the US) significantly underperforms the index year after year. An IFA doesn't especially have to beat the market - just what an inexperienced investor would do otherwise

    As an example https://www.dalbar.com/Portals/dalbar/Cache/News/PressReleases/QAIBPressRelease_2019.pdf
    Originally posted by Prism
    Which is why most people should buy indexes and hold them
    Misanthrope in search of similar for mutual loathing
    • Prism
    • By Prism 19th Apr 19, 5:24 PM
    • 772 Posts
    • 604 Thanks
    Prism
    Which is why most people should buy indexes and hold them
    Originally posted by bostonerimus
    I absolutely agree - but it seems most people don't do that at all. My feeling is that for every monthly contribute buy and hold index investors there are many other buying and selling (shares, ETFs and active funds)
    • dunstonh
    • By dunstonh 19th Apr 19, 5:43 PM
    • 97,975 Posts
    • 66,132 Thanks
    dunstonh
    The rule of thumb is that with a reasonably priced advisor you'll probably pay between 0.5% and 1% more in fees each year than if you DIY.
    Not quite as simple as that though.

    An IFA may cost between 0.5% and 1%. The dominant figure is 0.5%. So, I will use that. So, using an IFA will add 0.5% that DIY investors wont pay.

    However, that is just one bit of it. Platform charge and investment charge need to be considered.

    HL, the UK's most popular DIY platform is 0.45%. Most IFA platforms are in the 0.2x% range now. Whilst you dont have to use HL, it is worth noting that HL have more assets under management for DIY investors and all the other DIY platforms put together. So, that adds 0.2x% compared to IFA version. (lets say 0.20%).

    Investment funds cost exactly the same whether you use an IFA or DIY. However, lets note that two of the top selling funds to DIY invesrtors are HL's own brand funds costing 1.49% or 1.31% So, a significant proportion of DIY investors are paying 0.45% pllus 1.49% = 1.94% pa. We know from the IFAs that post on this site that their model portfolios tend to be around the 0.3-0.6% range.Lets use the upper figure So,. 0.50+ 0.25 +0.60% = 1.35%. That is cheaper than many of those going DIY.

    DIY does not mean it is cheaper than using an IFA.
    Using an IFA introduces the advsier charge that DIY will not have but DIY doesnt mean you will use a lower cost platform/provider or suitable investments.

    The numbers show that very many people are paying more by DIY than using a adviser. To save money, you need to DIY well. Not just DIY.
    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.
    • bostonerimus
    • By bostonerimus 19th Apr 19, 5:52 PM
    • 2,817 Posts
    • 2,134 Thanks
    bostonerimus

    The numbers show that very many people are paying more by DIY than using a adviser. To save money, you need to DIY well. Not just DIY.
    Originally posted by dunstonh
    I think that this comment can be lumped in with Prism's observation that many DIY investors lag the index.

    You need to DIY sensibly to come out ahead and there are some well known ways to do that relatively simply. It is not conceptually difficult to be successful DIYing, but people will try to make things more complicated than they need to be.
    Misanthrope in search of similar for mutual loathing
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