Pensions. Am I missing something here?
Discussion
Please excuse my ignorance in this, but I'm hoping that I'm not missing something really obvious and could do with people's views to clarify my thinking.
The situation is that I'm about to setup a pension, so I've talked with my usually very useful IFA who, having done the full FSA risk assessment etc., has proposed a Personal Pension using Skandia as the platform and has pulled together a bunch of 12 or so funds that he feels fits my requirements.
My father-in-law does a bit of dabbling with the markets and does so via a SIPP through Hargreaves Lansdown, so he is happy to walk me through setting things up if I also decide to go the SIPP route.
Now comes the interesting part. Looking through the paperwork provided by my IFA, it looks as though 1% of my total fund value, as it stands at each anniversary, goes to the IFA. Plus, anything from 0.2% to 1.7% of each individual fund's value goes back to the fund managers on an annual basis.
So, in 25 years time, the total value of the fund is 25% less than it could have been if I've managed to achieve the same results through a SIPP.
Now I know that IFAs need to turn a profit, and obviously the fund managers are in it for the money. No problem there. But 25%!?! The IFA alone would be taking well in excess of 100k out of my investment over 25 years for an annual review and generally making sure that the funds I'm in aren't going down the drain.
PLUS, they get a kickback from the individual funds as a loyalty bonus.
Can anyone tell me why I shouldn't be telling my friendly IFA to stick his lovely bundle of paperwork?
The situation is that I'm about to setup a pension, so I've talked with my usually very useful IFA who, having done the full FSA risk assessment etc., has proposed a Personal Pension using Skandia as the platform and has pulled together a bunch of 12 or so funds that he feels fits my requirements.
My father-in-law does a bit of dabbling with the markets and does so via a SIPP through Hargreaves Lansdown, so he is happy to walk me through setting things up if I also decide to go the SIPP route.
Now comes the interesting part. Looking through the paperwork provided by my IFA, it looks as though 1% of my total fund value, as it stands at each anniversary, goes to the IFA. Plus, anything from 0.2% to 1.7% of each individual fund's value goes back to the fund managers on an annual basis.
So, in 25 years time, the total value of the fund is 25% less than it could have been if I've managed to achieve the same results through a SIPP.
Now I know that IFAs need to turn a profit, and obviously the fund managers are in it for the money. No problem there. But 25%!?! The IFA alone would be taking well in excess of 100k out of my investment over 25 years for an annual review and generally making sure that the funds I'm in aren't going down the drain.
PLUS, they get a kickback from the individual funds as a loyalty bonus.
Can anyone tell me why I shouldn't be telling my friendly IFA to stick his lovely bundle of paperwork?
Personally I have no issues with paying someone to do a good job, if they earn the right because of their ability, and that includes Shark like IFA'S. How can you tell it they'll achieve great things for you ?
However I have a trust issue. I don't have any for anyone. I've decided to go the SIPP direction for 5 years, and see what my own inability and inexperience can achieve. Mind you I have 20 years of poorly performing company stakeholder pensions to fall back on. and 20 Years to Put it right.
However I have a trust issue. I don't have any for anyone. I've decided to go the SIPP direction for 5 years, and see what my own inability and inexperience can achieve. Mind you I have 20 years of poorly performing company stakeholder pensions to fall back on. and 20 Years to Put it right.
I'm usually someone who is happy to pay for a service, but when I worked out the overall reduction in the fund, I had an urge to swearing!
From what I've seen of his suggested funds, I'm not too impressed either. My FiL has managed a 30% plus return in the last 5 years, so with a bit of guidance from him, I'm seeing the SIPP route as a no brainer so far.
From what I've seen of his suggested funds, I'm not too impressed either. My FiL has managed a 30% plus return in the last 5 years, so with a bit of guidance from him, I'm seeing the SIPP route as a no brainer so far.
Smallend said:
I'm usually someone who is happy to pay for a service, but when I worked out the overall reduction in the fund, I had an urge to swearing!
From what I've seen of his suggested funds, I'm not too impressed either. My FiL has managed a 30% plus return in the last 5 years, so with a bit of guidance from him, I'm seeing the SIPP route as a no brainer so far.
I think I've managed about 15 % this year, but that's because of my particular "fondness" of one PLC's share price which I'm tracking very carefully, and a freak price increase that I never predicted. From what I've seen of his suggested funds, I'm not too impressed either. My FiL has managed a 30% plus return in the last 5 years, so with a bit of guidance from him, I'm seeing the SIPP route as a no brainer so far.
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