Pension Advice - Fund Manager or SIPP

[Ginge R]

Ozzie Osmond said:

^^ Yes, that's the way I see it.

I've always been entertained by "investment advice",

• Things go up - advisor points out how much value has been added by his expertise.
• Things go down - advisor says it's all due to unpredictable markets and negative sentiment...

Things may have moved on a little since you were last entertained. Advisers are no longer snake oil salesmen, advising trackers for the sake of it. They (we!) focus on objectives, principles, risk/loss, cost, strategy, asset allocation, tax. The returns are almost a by-product of getting the fundamentals right. But even if they are right, sometimes events still trump best process and loss arises. I don't take the blame for getting the basics right, and I don't take the credit for it, either.

[Jockman]

Ginge R said:

Things may have moved on a little since you were last entertained. Advisers are no longer snake oil salesmen, advising trackers for the sake of it. They (we!) focus on objectives, principles, risk/loss, cost, strategy, asset allocation, tax. The returns are almost a by-product of getting the fundamentals right. But even if they are right, sometimes events still trump best process and loss arises. I don't take the blame for getting the basics right, and I don't take the credit for it, either.

Feel better, Al?

[JulianPH]

OP - If you want a SIPP that is managed for you (rather than you having to be involved) have a look at www.intelligentmoney.com (I declare a connection) and the IM Optimum Portfolios and IM Optimum SIPP. There is a one off initial charge of 1.5% and an annual charge of 0.87% and these are inclusive of everything. It also enables you to hold commercial property in the future should you wish.

[Jockman]

JulianPH said:

OP - If you want a SIPP that is managed for you (rather than you having to be involved) have a look at www.intelligentmoney.com (I declare a connection) and the IM Optimum Portfolios and IM Optimum SIPP. There is a one off initial charge of 1.5% and an annual charge of 0.87% and these are inclusive of everything. It also enables you to hold commercial property in the future should you wish.

Julian you posted a thorough analysis of SIPPs a few weeks ago - can you locate it?

[JulianPH]

Jockman said:

Julian you posted a thorough analysis of SIPPs a few weeks ago - can you locate it?

I'll try and drag it up and repost here!

[Ginge R]

Jockman said:

Feel better, Al?

Grumble grumble.. (a bit)

.. better.

[JulianPH]

Hi Phil, was this the one?

JulianPH said:

Ozzie Osmond said:

I'm a huge fan of the low cost self-select SIPPs offered by people like Fidelity and Hargreaves Lansdown. Just pick some "mainstream" funds with a bit of common sense about risk. IIRC costs for under £250k invested should be less than 0.5% p.a.

That is a myth unfortunately. Hargreaves Lansdown charge 0.45% for its SIPP platform but you also have to pay the fund costs (typically 0.75%) so you are left with around 1.2% of specified annual costs when holding mainstream funds and that is before you factor in all of the additional ongoing fund costs.

For example Jupiter Merlin Balanced (a mainstream balanced managed fund) has an annual charge of 0.75% - but the total annual cost of the fund is 1.64% so your total annual cost (HL + Jupiter + fund costs) would be 2.09% (£2,090 on a £100k pension) a year for no advice/structuring/rebalancing whatsoever

What about a managed option using passive investments?

Nutmeg has been going a few years and has a 0.75% annual charge, but again does not offer any advice or age/risk appropriate rebalancing so is a decent cheap and basic model (if you are happy to review your holding yourself regularly) - nutmeg.com

Fiver a Day in newer and has a 0.5% initial charge with a 0.82% "average" annual charge, but does have an adviser on hand for advice and rebalancing (I believe at 0.5% for each portfolio rebalance) - fiveraday.co.uk

Intelligent Money is very established and has a 1.5% one off initial with a fixed 0.87% annual charge (including unlimited ongoing rebalancing). It is also more sophisticated, rebalancing ongoing risk/reward using target dating based upon your end requirement (lump sum to withdraw or ongoing income) - intelligentmoney.com

I am sure there are others as well. Parmenion offers a similar no advice or age/risk appropiare rebalancing service, for example - parmenion.co.uk and Club Finance are the cheapest DIY platform you will ever find (whilst also being very good) and I never understand why they don't get more media coverage.

Sorry - that ended up being very long winded!

[Ginge R]

Jockman said:

If you want to keep it simple, stick to a Personal Pension PP through your Company but remember if you want to run it passively then you'll need to pay someone at some stage to review it and to check that it still meets your needs / goals / ambitions.

This!

For most people, a bog standard PP (or new style SIPP with the likes of Parmenion) will more than suffice. I am unconvinced by the argument that the most enthusiastic and insightful of amateur investors can beat a professional over time. Sure, you may get lucky by buying gold before it rockets in value, but over the medium or long term.. really?

And if you could, shouldn't you be getting on with your life anyway, instead of wading through the banal, turgid market rubbish that this sector thrives on disseminating? It's all contrived to hook people in, to make them feel there's a knack that has to be mastered.

Identify what you need, identify what you have, what out if there's a difference between the two and choose the cheapest and most effective route to getting there. One of my biggest wins recently was sitting down with two clients last night, in their fifties, and making them realise that if they wanted, they could stop work and enjoy life with a safe withdrawal rate.

[Ozzie Osmond]

Ginge R said:

...sometimes events still trump best process and loss arises.

Regrettably "best process" can't trump "events" and give rise to "gain". Mind you, Uri Geller still swears he can bend those spoons...

[Ozzie Osmond]

Ginge R said:

One of my biggest wins recently was sitting down with two clients last night, in their fifties, and making them realise that if they wanted, they could stop work and enjoy life with a safe withdrawal rate.

Just run me through that "safe" bit again...

[Ginge R]

JulianPH said:

Hi Phil, was this the one?

JulianPH said:

Ozzie Osmond said:

I'm a huge fan of the low cost self-select SIPPs offered by people like Fidelity and Hargreaves Lansdown. Just pick some "mainstream" funds with a bit of common sense about risk. IIRC costs for under £250k invested should be less than 0.5% p.a.

That is a myth unfortunately. Hargreaves Lansdown charge 0.45% for its SIPP platform but you also have to pay the fund costs (typically 0.75%) so you are left with around 1.2% of specified annual costs when holding mainstream funds and that is before you factor in all of the additional ongoing fund costs.

For example Jupiter Merlin Balanced (a mainstream balanced managed fund) has an annual charge of 0.75% - but the total annual cost of the fund is 1.64% so your total annual cost (HL + Jupiter + fund costs) would be 2.09% (£2,090 on a £100k pension) a year for no advice/structuring/rebalancing whatsoever

What about a managed option using passive investments?

Nutmeg has been going a few years and has a 0.75% annual charge, but again does not offer any advice or age/risk appropriate rebalancing so is a decent cheap and basic model (if you are happy to review your holding yourself regularly) - nutmeg.com

Fiver a Day in newer and has a 0.5% initial charge with a 0.82% "average" annual charge, but does have an adviser on hand for advice and rebalancing (I believe at 0.5% for each portfolio rebalance) - fiveraday.co.uk

Intelligent Money is very established and has a 1.5% one off initial with a fixed 0.87% annual charge (including unlimited ongoing rebalancing). It is also more sophisticated, rebalancing ongoing risk/reward using target dating based upon your end requirement (lump sum to withdraw or ongoing income) - intelligentmoney.com

I am sure there are others as well. Parmenion offers a similar no advice or age/risk appropiare rebalancing service, for example - parmenion.co.uk and Club Finance are the cheapest DIY platform you will ever find (whilst also being very good) and I never understand why they don't get more media coverage.

Sorry - that ended up being very long winded!

Just noticed I'm in there! (Fiver)

If I could clarify, the rebalancing is done at no extra cost. The average is coming in at 0.7-0.8% pa, funds, rebalancing, reporting, platform, and that's an advised service too. If you want a printed statement each six months instead of a PDF, it'll cost you, erm, a fiver.

[Ginge R]

Ozzie Osmond said:

Just run me through that "safe" bit again...

I didn't mention 'safe', I referred to a safe withdrawal rate.

[Ginge R]

Ozzie Osmond said:

Ginge R said:

...sometimes events still trump best process and loss arises.

Regrettably "best process" can't trump "events" and give rise to "gain". Mind you, Uri Geller still swears he can bend those spoons...

Couldn't agree more about the first bit. But it's not supposed to. I would be just as worried if a client's returns were too hot for what he had in the portfolio. I'd be asking 'why?' and see if the fund manager wasn't overcooking, overlooking, or selling the best assets at the wrong time simply because he had one eye on stroking quartile rankings for a change of employer and wanted to gilt the cv.

[JulianPH]

Ginge R said:

Just noticed I'm in there! (Fiver)

If I could clarify, the rebalancing is done at no extra cost. The average is coming in at 0.7-0.8% pa, funds, rebalancing, reporting, platform, and that's an advised service too. If you want a printed statement each six months instead of a PDF, it'll cost you, erm, a fiver.

Hi Al

Sorry, of course, you are right!

Julian

[Ginge R]

No problemo

Better to be looked over, than overlooked.

Nice summary!

[Guvernator]

Thanks JulianPH, that is a great summary. Interesting to see that HL aren't actually as cheap as one would be led to believe. I find it a bit annoying that there are "hidden" charges everywhere or so it seems. "We only charge 0.5% but don't forget this doodad which is another 1% and the thingamybob that is another 0.75%". Just tell me what I'm going to pay you in TOTAL ffs.

The whole pensions\investment arena seems to be purposely designed to catch out the unwary. I shouldn't need to be reading through pages of research to set up a relatively simple pension!

[sidicks]

Guvernator said:

Thanks JulianPH, that is a great summary. Interesting to see that HL aren't actually as cheap as one would be led to believe. I find it a bit annoying that there are "hidden" charges everywhere or so it seems. "We only charge 0.5% but don't forget this doodad which is another 1% and the thingamybob that is another 0.75%". Just tell me what I'm going to pay you in TOTAL ffs.

The whole pensions\investment arena seems to be purposely designed to catch out the unwary. I shouldn't need to be reading through pages of research to set up a relatively simple pension!

As explained above, different services have different charges made to different people. The total charge will depend on a range of factors.

[Jockman]

Cheers Julian

[Guvernator]

sidicks said:

As explained above, different services have different charges made to different people. The total charge will depend on a range of factors.

Yep I get that but it should be easier to understand. I had no idea what platform costs where until a few days ago. I understand them a bit more now but why am I paying those or if I have to, why am I exposed to that side of it? Why are they all different etc. It's like me telling my clients how much it costs me to buy something from a 3rd party supplier for them. Surely that's not relevant, what is relevant is how much they will pay me for the entire service in total.

I realise their are probably some regulations around total visibility etc but I think it makes things more complicated. I don't need to know about platform costs, dealing costs etc. Give me a total cost I'll be paying so I can compare it to other services and what they offer. Failing that it should be possible to give a fairly accurate percentage figure for the total service based on a few simple questions. More often than not though I am getting the answer "it depends" or a list as long as your arm of various percentage charges. I like to think I'm a reasonably intelligent person, I'm even not too bad at maths but I don't get that warm fuzzy feeling when speaking to a lot of advisor's that they are really explaining how much it's all going to cost me.

[JulianPH]

Guvernator said:

Yep I get that but it should be easier to understand. I had no idea what platform costs where until a few days ago. I understand them a bit more now but why am I paying those or if I have to, why am I exposed to that side of it? Why are they all different etc. It's like me telling my clients how much it costs me to buy something from a 3rd party supplier for them. Surely that's not relevant, what is relevant is how much they will pay me for the entire service in total.

I realise their are probably some regulations around total visibility etc but I think it makes things more complicated. I don't need to know about platform costs, dealing costs etc. Give me a total cost I'll be paying so I can compare it to other services and what they offer. Failing that it should be possible to give a fairly accurate percentage figure for the total service based on a few simple questions. More often than not though I am getting the answer "it depends" or a list as long as your arm of various percentage charges. I like to think I'm a reasonably intelligent person, I'm even not too bad at maths but I don't get that warm fuzzy feeling when speaking to a lot of advisor's that they are really explaining how much it's all going to cost me.

You are, of course, 100% correct. Unfortunately the Financial Conduct Authority decided (with their infinite wisdom) that you want really want is a breakdown of each and every fee element (advice fees/platform fees/dealing fees/custody fees/investment management fees/ additional investment management expenses/SIPP fees/etc.) rather than a price for the whole service/product.

Remember, they know what is better for you than anyone else...

So the industry is now forced to price this way. Of course there is nothing stopping the industry adding all of this up and giving you the total, but that would generally show how sodding expensive it all is!

It is like M&S having to give you a breakdown of every element of costs when you hand the jumper/sandwich/whatever over at the till. You (and I, and everyone else) don't care!

Tip - the best value always comes from providers/advisers that give the the complete cost. They often look more expensive than those that quote only their own headline fees (such as Hargreaves Lansdown) and omit all other costs, but when you look into things in more detail you see these are actually the best value (unfortunately most people don't look past the headline rate though).