Financial Adviser and contract entry fees
Discussion
I am due to retire next year at 60. I have brought in an independent financial adviser to review my pensions and wider finances, and to advise on investing the money from the recent sale of an investment property..
She is talking about a managed investment with a 2% entry fee (about £4k).
Naive question, but why are these entry fees so high, when they are then also taking an annual mangement fee?
She is talking about a managed investment with a 2% entry fee (about £4k).
Naive question, but why are these entry fees so high, when they are then also taking an annual mangement fee?
Cogcog said:
I am due to retire next year at 60. I have brought in an independent financial adviser to review my pensions and wider finances, and to advise on investing the money from the recent sale of an investment property..
She is talking about a managed investment with a 2% entry fee (about £4k).
Naive question, but why are these entry fees so high, when they are then also taking an annual mangement fee?
Are you paying a separate upfront fee for the initial advice? If not, presumably that explains the 2% cost? How complicated are your investment affairs? It's hard to know whether £4k is appropriate.She is talking about a managed investment with a 2% entry fee (about £4k).
Naive question, but why are these entry fees so high, when they are then also taking an annual mangement fee?
The annual management fee will be there to cover the annual management of your portfolio and ongoing advice. Again, it's impossible to say whether the fees are appropriate without more information.
Not_an_IFA said:
Are you paying a separate upfront fee for the initial advice? If not, presumably that explains the 2% cost? How complicated are your investment affairs? It's hard to know whether £4k is appropriate.
The annual management fee will be there to cover the annual management of your portfolio and ongoing advice. Again, it's impossible to say whether the fees are appropriate without more information.
I am paying a fee of £750 for the fact finding and initial advice. Therefater, 0.75% for an annual review and advice.The annual management fee will be there to cover the annual management of your portfolio and ongoing advice. Again, it's impossible to say whether the fees are appropriate without more information.
My finances are not overly complex . I have a final salary deferred public sector pension due 2020 and my wife has a number of small occupational pensions. I already have the rest of my assets invested in stuff I did myself ove rthe years with quite a risky profile, so the aim was to balance it back a bit with the money from the hpouse sale with some steady-eddie managed assets aimmed at longer term growth. as I am continuing a bit of work for a few years. The only complexity is some inheritance tax planning.
Cogcog said:
I am due to retire next year at 60. I have brought in an independent financial adviser to review my pensions and wider finances, and to advise on investing the money from the recent sale of an investment property..
She is talking about a managed investment with a 2% entry fee (about £4k).
Naive question, but why are these entry fees so high, when they are then also taking an annual mangement fee?
I think it's important to understand what you are getting.She is talking about a managed investment with a 2% entry fee (about £4k).
Naive question, but why are these entry fees so high, when they are then also taking an annual mangement fee?
Will they be building you a retirement plan that shows whether retiring at 60 is achievable taking into account your desired lifestyle in retirement, and the likelihood of you running out of money? This typically takes up the majority of the time in a retirement planning exercise - the investment aspect is much less time consuming (and less value add, bearing in mind the key point of engaging with an adviser at this stage of life is giving clarity and peace of mind, IMO).
Only once you understand what you are getting can you then make a value judgement.
Same for the ongoing service - if they are just meeting with you once a year to tell you how your portfolio is doing - do you consider this to be of significant value?
Derek Chevalier said:
I think it's important to understand what you are getting.
Will they be building you a retirement plan that shows whether retiring at 60 is achievable taking into account your desired lifestyle in retirement, and the likelihood of you running out of money? This typically takes up the majority of the time in a retirement planning exercise - the investment aspect is much less time consuming (and less value add, bearing in mind the key point of engaging with an adviser at this stage of life is giving clarity and peace of mind, IMO).
Only once you understand what you are getting can you then make a value judgement.
Same for the ongoing service - if they are just meeting with you once a year to tell you how your portfolio is doing - do you consider this to be of significant value?
She has looked at the projected spend and income streams, and we have completed risk tolerance questionnaires. So that bit is well underway. Therefater i am expecting her to recommend where to invest my £200k, bearing in mind by plans and my other pensions and investments. Annually i expect her to make sure it is doing what we want it to do for the year going forward. Will they be building you a retirement plan that shows whether retiring at 60 is achievable taking into account your desired lifestyle in retirement, and the likelihood of you running out of money? This typically takes up the majority of the time in a retirement planning exercise - the investment aspect is much less time consuming (and less value add, bearing in mind the key point of engaging with an adviser at this stage of life is giving clarity and peace of mind, IMO).
Only once you understand what you are getting can you then make a value judgement.
Same for the ongoing service - if they are just meeting with you once a year to tell you how your portfolio is doing - do you consider this to be of significant value?
The question I had was around why having done the detailed enquiry bit for under £1k and telling me to buy pork bellies, there is a much larger entry fee than the advice fee.
Have you read through the IM pages and looked at their website.
No connection other than looking at moving my funds over after some good discussions and meetings that gave me a lot of “food for thought”
There is no pressure from them so no real downside in looking at another avenue and maybe giving you a bit more help in making your decision on how you would like the money to be invested.
Would say it’s at least worth a chat.
No connection other than looking at moving my funds over after some good discussions and meetings that gave me a lot of “food for thought”
There is no pressure from them so no real downside in looking at another avenue and maybe giving you a bit more help in making your decision on how you would like the money to be invested.
Would say it’s at least worth a chat.
Cogcog said:
Derek Chevalier said:
I think it's important to understand what you are getting.
Will they be building you a retirement plan that shows whether retiring at 60 is achievable taking into account your desired lifestyle in retirement, and the likelihood of you running out of money? This typically takes up the majority of the time in a retirement planning exercise - the investment aspect is much less time consuming (and less value add, bearing in mind the key point of engaging with an adviser at this stage of life is giving clarity and peace of mind, IMO).
Only once you understand what you are getting can you then make a value judgement.
Same for the ongoing service - if they are just meeting with you once a year to tell you how your portfolio is doing - do you consider this to be of significant value?
She has looked at the projected spend and income streams, and we have completed risk tolerance questionnaires. So that bit is well underway. Therefater i am expecting her to recommend where to invest my £200k, bearing in mind by plans and my other pensions and investments. Annually i expect her to make sure it is doing what we want it to do for the year going forward. Will they be building you a retirement plan that shows whether retiring at 60 is achievable taking into account your desired lifestyle in retirement, and the likelihood of you running out of money? This typically takes up the majority of the time in a retirement planning exercise - the investment aspect is much less time consuming (and less value add, bearing in mind the key point of engaging with an adviser at this stage of life is giving clarity and peace of mind, IMO).
Only once you understand what you are getting can you then make a value judgement.
Same for the ongoing service - if they are just meeting with you once a year to tell you how your portfolio is doing - do you consider this to be of significant value?
The question I had was around why having done the detailed enquiry bit for under £1k and telling me to buy pork bellies, there is a much larger entry fee than the advice fee.
The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
Edited by Derek Chevalier on Sunday 20th October 22:09
Derek Chevalier said:
Great, so sounds like you've been through the financial planning exercise and built something that looks something like this
The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
Yeah the £750 is the planning. I had already done a plan of needs vs income with some modest orediction son growth similar to this. But in Excel!The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
Edited by Derek Chevalier on Sunday 20th October 22:09
Cogcog said:
Derek Chevalier said:
Great, so sounds like you've been through the financial planning exercise and built something that looks something like this
The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
Yeah the £750 is the planning. I had already done a plan of needs vs income with some modest orediction son growth similar to this. But in Excel!The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
Edited by Derek Chevalier on Sunday 20th October 22:09
How does your retirement pot look if we get long periods of market underperformance and/or high inflation?
Are you prepared to take a cut in real income if this occurs or are you pretty fixed in your retirement income requirements?
Is your proposed portfolio aligned with your risk profile AND the risk required to ensure you don't run out of money.
You may have already read it - this is really useful if your adviser hasn't used Timeline (2nd picture) - currently free on Kindle Unlimited.
https://www.amazon.co.uk/Beyond-4-Rule-retirement-...
Derek Chevalier said:
Cogcog said:
Derek Chevalier said:
Great, so sounds like you've been through the financial planning exercise and built something that looks something like this
The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
Yeah the £750 is the planning. I had already done a plan of needs vs income with some modest orediction son growth similar to this. But in Excel!The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
Note that I'm not making a judgement on the level of fees, just what each stage typically covers.
Or maybe you're saying they've done the financial planning and advice for £750 and are charging £x,xxx for the implementation stage?
How does your retirement pot look if we get long periods of market underperformance and/or high inflation?
Are you prepared to take a cut in real income if this occurs or are you pretty fixed in your retirement income requirements?
Is your proposed portfolio aligned with your risk profile AND the risk required to ensure you don't run out of money.
You may have already read it - this is really useful if your adviser hasn't used Timeline (2nd picture) - currently free on Kindle Unlimited.
https://www.amazon.co.uk/Beyond-4-Rule-retirement-...
Given questions like the first you pose there, Derek, excel can easily be used to play with that.....of course there are a gazillion variables to consider, so this isn’t a precise science!
Given your last one: I bet that is an impossible conundrum for many.....I believe if you are hoping for a 25-30+ year retirement, it is no good being in a low-risk mindset (unless your pot is massive, of course!), & therefore that middle point about being prepared to take a cut in income might always have to be present!
Actually, I suspect there are potentially several step points in retirement where one might want to take a reduction anyway.
Also thumbs up for his book.....I need to re-read it now I am closer to ‘winding down’.
I do wish he would make timeline more widely available than just via advisors, but then I guess that might remove some of the mystery that facilitates those fees being justified, & would spoil his business model
OP, happy to share a sanitised spreadsheet I’ve created in case it might help you, just message me your email!
& another very firm vote for popping on the IM thread and having a chat with Nik.....time (& no cost!) you would find very well spent, I am sure!
I put a few hypothetical situations into my Excel sheet, so i could vary inflation, so my living costs went up year on year (which was a massive surprise when you adjust even 2-3% in year on year). I also projected what would happen if I died, so my occupational pension became a widows pension for my wife and she lost my state pension. I also didnt want to hand anything over in pension company drawdown or annuity so itr was all under my control..
I was then able to see the years when there was surplus and the years when there was shortfall, and plan accordingly.
I was then able to see the years when there was surplus and the years when there was shortfall, and plan accordingly.
mikeiow said:
Given questions like the first you pose there, Derek, excel can easily be used to play with that.....of course there are a gazillion variables to consider, so this isn’t a precise science!
Potentially, but where are you getting your UK based data from encompassing >100 years of market returns & inflation for UK and global assets. I've seen some US based numbers but nothing UK specific.Timeline also has useful tools that enable you compromise your spending if we get poor retirement markets.
https://finalytiq.co.uk/guyton-klinger-sustainable...
Again, I don't want to kick Excel but it reminded me of the time I built a CDO pricer in a previous life - I got a reasonable outcome but it was far from the best tool for the job.
mikeiow said:
Given your last one: I bet that is an impossible conundrum for many.....I believe if you are hoping for a 25-30+ year retirement, it is no good being in a low-risk mindset (unless your pot is massive, of course!), & therefore that middle point about being prepared to take a cut in income might always have to be present!
If you look at a couple retiring at 60, there's a reasonable chance of one of them making it to 100 - will your portfolio run out before you both die? https://finalytiq.co.uk/longevity/
The discussion around risk is such a key one - and why a risk questionnaire in isolation isn't giving the whole picture. If someone really isn't comfortable with taking sufficient risk to minimise their chance of running out of money, would they be happy to work for longer and/or take a reduced income in retirement, as you point out, later on in their life.
mikeiow said:
I do wish he would make timeline more widely available than just via advisors, but then I guess that might remove some of the mystery that facilitates those fees being justified, & would spoil his business model
A couple of points1. Very few advisers are doing genuine financial planning (estimates around 5% on a recent podcast) and I believe fewer are using his tool - although numbers are growing. So the vast majority will be charging fees unrelated to this (this is a loooong conversation in itself
)2. There is an argument to say that unless you have a reasonable amount of knowledge and understand what the tool is doing it may not give the best outcomes. I'll ask them and report back. Abraham is one of the good guys, so I'm sure he's got genuine reasons.
Maybe a Timeline webinar (in the context of overall retirement planning could be useful)? I also wonder if there is anyone out there offering an hourly charging model to run someone's plan through Timeline.
Unless that £200k is a really big element of your overall financial position - which seems unlikely - you have two main questions, neither of which has to be complicated,
1. How to invest it, and
2. How fast to spend it.
Somebody earlier has already mentioned the Intelligent Money thread (I have no connection with IM). It's well worth reading that thread and could help you decide how to invest. Either way, you will learn useful stuff.
Spend £20 at Amazon on a copy of "Beyond The 4% Rule". This book explains very clearly the rate at which it's reasonably safe to spend.
https://www.amazon.co.uk/Beyond-4-Rule-retirement-...
Remember: Compared with paying an adviser all the way through the process a DIY approach doesn't even have to be particularly brilliant. In effect you're at least 10% ahead before you start. Let's assume the adviser puts you into investments which return 7.5% p.a. The advisor's 0.75% annual charge is costing 10% of that - after you've already taken the initial hit of £4,750
1. How to invest it, and
2. How fast to spend it.
Somebody earlier has already mentioned the Intelligent Money thread (I have no connection with IM). It's well worth reading that thread and could help you decide how to invest. Either way, you will learn useful stuff.
Spend £20 at Amazon on a copy of "Beyond The 4% Rule". This book explains very clearly the rate at which it's reasonably safe to spend.
https://www.amazon.co.uk/Beyond-4-Rule-retirement-...
Remember: Compared with paying an adviser all the way through the process a DIY approach doesn't even have to be particularly brilliant. In effect you're at least 10% ahead before you start. Let's assume the adviser puts you into investments which return 7.5% p.a. The advisor's 0.75% annual charge is costing 10% of that - after you've already taken the initial hit of £4,750
rockin said:
Remember: Compared with paying an adviser all the way through the process a DIY approach doesn't even have to be particularly brilliant. In effect you're at least 10% ahead before you start. Let's assume the adviser puts you into investments which return 7.5% p.a. The advisor's 0.75% annual charge is costing 10% of that - after you've already taken the initial hit of £4,750
It's probably more than that when you consider a global portfolio can be had all in for 30bps and typical all in adviser fee is <2%.tighnamara said:
Have you read through the IM pages and looked at their website.
No connection other than looking at moving my funds over after some good discussions and meetings that gave me a lot of “food for thought”
There is no pressure from them so no real downside in looking at another avenue and maybe giving you a bit more help in making your decision on how you would like the money to be invested.
Would say it’s at least worth a chat.
No connection other than looking at moving my funds over after some good discussions and meetings that gave me a lot of “food for thought”
There is no pressure from them so no real downside in looking at another avenue and maybe giving you a bit more help in making your decision on how you would like the money to be invested.
Would say it’s at least worth a chat.
mikeiow said:
& another very firm vote for popping on the IM thread and having a chat with Nik.....time (& no cost!) you would find very well spent, I am sure!
rockin said:
Somebody earlier has already mentioned the Intelligent Money thread (I have no connection with IM). It's well worth reading that thread and could help you decide how to invest. Either way, you will learn useful stuff.
Thank for the mention guys. OP - we would be happy to assist if you post on the IM sticky at the top of the finance section. There is no charge for this.Derek Chevalier said:
The next stage will be to pay for the advice - a personal recommendation for investments that are best suited to deliver the plan. The fees will cover areas such as research, suitability reports, implementation and liability cover.
You have paid for the financial planning and now you will need to pay them if you want advice, which as Derek has pointed out is just the recommendation/sale of financial products.Edited by Derek Chevalier on Sunday 20th October 22:09
This clearly highlights the difference between financial planning (the important bit) and selling you a product as part of this process (the expensive bit).
As Derek further highlights, 95% of financial advisers don't even do useful financial planning with their clients.
So you are effectively paying this adviser £4,000 upfront and another £1,500 a year for an annual meeting on the continued suitability of the products she recommends. This is of course on to of any platform and investment management costs which could easily bring this to 2% a year or more.
rockin said:
Remember: Compared with paying an adviser all the way through the process a DIY approach doesn't even have to be particularly brilliant. In effect you're at least 10% ahead before you start. Let's assume the adviser puts you into investments which return 7.5% p.a. The advisor's 0.75% annual charge is costing 10% of that - after you've already taken the initial hit of £4,750
^^^ This.Derek Chevalier said:
2. There is an argument to say that unless you have a reasonable amount of knowledge and understand what the tool is doing it may not give the best outcomes. I'll ask them and report back. Abraham is one of the good guys, so I'm sure he's got genuine reasons.
From Abraham, to paraphrase - they know the adviser market well so that's obviously their initial focus. Building tools for general public is a bigger undertaking in terms of education and customer service, but there could be future offerings via one or more D2C platforms. HTH Gassing Station | Finance | Top of Page | What's New | My Stuff