A slight sense of being taken for a ride, am I being unfair?

[seapod]

I have a nagging sense of unease that I am paying over the odds for my pension investments. I'd be interested in a broad swathe of opinion from the finance group, perhaps I am being unfair or maybe I have been too influenced by the Sunday Times vendetta against Woodford, SJP, etc. What do you think?

I have consolidated various defined contribution pensions into a single investment with my financial planner - a varied portfolio of active and passive funds. Its not unique to me, its their 'growth fund' and it has been around for about 15 years. I think I have a handle on the total fees, but as usual its bloody difficult to be 100% certain. I have had my pension with them for about 3 years now.

The short summary is 0.2% platform fee (Elevate/Standard Life) + 0.75% management fee to advisor + 1.15% (average product fee of portfolio). I do not have an entry or exit fee unless charged by one of the individual products within the fund. So in total I am paying 2.1%. The fact that it is north of 2% seems to be psychologically bugging me. 0.95% in management/platform fees seems punchy to me.

I consider myself reasonably financially savvy - I'm well aware I could stick everything in a passive tracker and pay a lot less. But how do I work out whether I am getting value for money? My perception is not helped by the fact that ~10% of the fund is invested in M&G Feeder Property Portfolio which is currently suspended and therefore likely to drop further once liquid again.

What else do I need to provide to help make a judgement? I'm fully expecting a range of opinions. The fund returned ~7% in the last 9 months - I made a personal pension contribution in March which has made it complicated to value on a 12 month basis.

Whats the gut instinct response of PH?

[financialbloke]

Your adviser is not overcharging - most IFAs are charging 1% per annum these days.

The platform cost is good value at 0.2%.

In terms of whether you are getting good value from your adviser, well, its not just the fund picking, he can hold your hand through drawdown when you access the pension so that it works for you. Sticking it all in a tracker is all well and good, but what if you circumstances change? Thats where regular meetings with your IFA add value. I can't comment on the funds you are in based on the cost alone.

[Simpo Two]

Frankly sir - having travelled this route rather bumpily myself - I would transfer it to Intelligent Money and let them look after your pension. It will do just as well if not better, not least because you're not carrying a passenger. 0.75% of 7% means you lost over 10% of your growth, or almost 13% if there's VAT on it.

[anonymous-user]

Yup, the only real question there is whether you think you're getting appropriate value from the planner's 0.75% p.a.

What does he/she actually do to earn his/her corn? Is your net investment performance (risk adjusted) better than market average?

And then there's the question (which doesn't need to be answered on here) as to how that 0.75% converts into cold, hard cash. For instance,

0.75% of £100k is £750 p.a. You don't get much for that these days.

0.75% of £1.0m is £7,500 p.a. You'd want some pretty fancy input for that sort of money! Keep your account running for a decade and the adviser has got a shiny new Range Rover on their drive, thank you very much.

[JulianPH]

seapod said:

I have a nagging sense of unease that I am paying over the odds for my pension investments. I'd be interested in a broad swathe of opinion from the finance group, perhaps I am being unfair or maybe I have been too influenced by the Sunday Times vendetta against Woodford, SJP, etc. What do you think?

I have consolidated various defined contribution pensions into a single investment with my financial planner - a varied portfolio of active and passive funds. Its not unique to me, its their 'growth fund' and it has been around for about 15 years. I think I have a handle on the total fees, but as usual its bloody difficult to be 100% certain. I have had my pension with them for about 3 years now.

The short summary is 0.2% platform fee (Elevate/Standard Life) + 0.75% management fee to advisor + 1.15% (average product fee of portfolio). I do not have an entry or exit fee unless charged by one of the individual products within the fund. So in total I am paying 2.1%. The fact that it is north of 2% seems to be psychologically bugging me. 0.95% in management/platform fees seems punchy to me.

I consider myself reasonably financially savvy - I'm well aware I could stick everything in a passive tracker and pay a lot less. But how do I work out whether I am getting value for money? My perception is not helped by the fact that ~10% of the fund is invested in M&G Feeder Property Portfolio which is currently suspended and therefore likely to drop further once liquid again.

What else do I need to provide to help make a judgement? I'm fully expecting a range of opinions. The fund returned ~7% in the last 9 months - I made a personal pension contribution in March which has made it complicated to value on a 12 month basis.

Whats the gut instinct response of PH?

I will address your points one at a time.

1) 2.1% a year is not bad if your IFA is delivering value across all your financial needs. As you are asking here and questioning this it would suggest that they are not.

2) You financial adviser is likely not not managing your money, they are simply selecting the investment managers who do this for you.

3) Your financial adviser has not lost a penny in doing this, you have taken all the risk and they are sharing the reward without putting any money up.

4) Regarding below, I could be completely wrong in this if your adviser is also working with you on financial planning, tax mitigation and your other financial needs/requirements. If not then:

financialbloke said:

Your adviser is not overcharging - most IFAs are charging 1% per annum these days.

The platform cost is good value at 0.2%.

In terms of whether you are getting good value from your adviser, well, its not just the fund picking, he can hold your hand through drawdown when you access the pension so that it works for you. Sticking it all in a tracker is all well and good, but what if you circumstances change? Thats where regular meetings with your IFA add value. I can't comment on the funds you are in based on the cost alone.

^^^ This is terrible advice.

2.1% (that you know of) is not bad, but it is not good either. There are likely to be other charges on top of this.

You should not have to pay more than 1% (or less).

Others will come forward with their opinions.




Bloody Typos!

Edited by JulianPH on Monday 6th January 23:24

[mikeiow]

seapod said:

I have a nagging sense of unease that I am paying over the odds for my pension investments.

<snip>

What else do I need to provide to help make a judgement? I'm fully expecting a range of opinions. The fund returned ~7% in the last 9 months - I made a personal pension contribution in March which has made it complicated to value on a 12 month basis.

Whats the gut instinct response of PH?

Okay, so you have only invested in that fund for a short period....but how has the fund performed over 1/3/5/10 years? You say it has been around for 15, so how has it done?

Note 1: I am mindful that past performance is no guarantee to future.....
.......but it is kind of the only way to “compare”, or at least get a feel for how it has performed.

You can then also compare with alternatives (see note 1!)

You can skim the IM sticky at the top of this finance section and find some figures on their options - clearly if you can shave over 1% in fees, then that is 1% saved, even when funds might go down (market corrections do happen, and those advisor fees keep being paid!).
If you get perceived value from their help, then maybe the fees are worth it to you. The fact you are here suggests perhaps not, but that isn’t a given!

& on that IM thread, you could optionally call upon Nik to take a no-obligation look at your situation - highly recommended by some of us on here who are not linked to them other than by being investors

[seapod]

JulianPH said:

?

THANK YOU - APOLOGIES FOR CAPS BUT I CANT WORK OUT HOW TO DO COLOUR! The advisor is making about £4k/year from me in fees.

I will address your points one at a time.

1) 2.1% a year is not bad if your IFA is delivering value across all your financial needs. As you are asking here and questioning this it would suggest that they are not. - NO, ONLY PENSION. I MEET THEM ONCE A YEAR FOR 90 MINUTES. THATS IT.

2) You financial adviser is likely not not managing your money, they are simply selecting the investment managers who do this for you. - THEY HAVE WRAPPED A BUNCH OF PRODUCTS TOGETHER TO CREATE 'THEIR' FUND BUT THEY ARE ALL OFF THE SHELF PRODUCTS

3) Your financial adviser has not lost a penny in doing this, you have taken all the risk and they are sharing the reward without putting any money up. - EXACTLY

4) Regarding below, I could be completely wrong in this if your adviser is also working with you on financial planning, tax mitigation and your other financial needs/requirements. If not then: I DONT THINK YOU ARE, UNFORTUNATELY

financialbloke said:

Your adviser is not overcharging - most IFAs are charging 1% per annum these days.

The platform cost is good value at 0.2%.

In terms of whether you are getting good value from your adviser, well, its not just the fund picking, he can hold your hand through drawdown when you access the pension so that it works for you. - IM 20+ YEARS AWAY FROM DRAWDOWN
Sticking it all in a tracker is all well and good, but what if you circumstances change? Thats where regular meetings with your IFA add value. HERE ARE THE FUNDS


I can't comment on the funds you are in based on the cost alone.

2.1% (that you know of) is not bad, but it is not good either. There are likely to be other charges on top of this.

You should not have to pay more than 1% (or less).

Others will come forward with their opinions.
HERE ARE THE FUNDS

[seapod]

mikeiow said:

Okay, so you have only invested in that fund for a short period....but how has the fund performed over 1/3/5/10 years? You say it has been around for 15, so how has it done?

Note 1: I am mindful that past performance is no guarantee to future.....
.......but it is kind of the only way to “compare”, or at least get a feel for how it has performed.

You can then also compare with alternatives (see note 1!)

You can skim the IM sticky at the top of this finance section and find some figures on their options - clearly if you can shave over 1% in fees, then that is 1% saved, even when funds might go down (market corrections do happen, and those advisor fees keep being paid!).
If you get perceived value from their help, then maybe the fees are worth it to you. The fact you are here suggests perhaps not, but that isn’t a given!

& on that IM thread, you could optionally call upon Nik to take a no-obligation look at your situation - highly recommended by some of us on here who are not linked to them other than by being investors

Thanks Mike - I have actually been with them for about 10 years, just in the latest fund for 3. Should have made it clearer. Returns have been average, I certainly haven't benefited from the active management 'upside'. And this is before I take into account the fees. I think it would benefit from an external review, will read the sticky at the top of the forum.

[FazerBoy]

seapod said:

THANK YOU - APOLOGIES FOR CAPS BUT I CANT WORK OUT HOW TO DO COLOUR! The advisor is making about £4k/year from me in fees.

Well, someone’s doing well out of this arrangement, but it’s not you...

[Phooey]

JulianPH said:

financialbloke said:

Your adviser is not overcharging - most IFAs are charging 1% per annum these days.

The platform cost is good value at 0.2%.

In terms of whether you are getting good value from your adviser, well, its not just the fund picking, he can hold your hand through drawdown when you access the pension so that it works for you. Sticking it all in a tracker is all well and good, but what if you circumstances change? Thats where regular meetings with your IFA add value. I can't comment on the funds you are in based on the cost alone.

^^^ This is terrible advice.

+1 for poor advice

Agree that a lot of IFAs charge around 1% - sadly only a small percentage of these IFAs will be adding value to justify their fees (formerly known as commission). But paying circa 1% to have "meetings" and "hand holding" with your IFA is not good advice IMO. Sadly we never know how good (or bad) an IFA is until many years down the line, but what we do know is - paying a % each and every year to a "middle man" is a becoming an out-dated way to invest.

[JulianPH]

seapod said:

Thanks Mike - I have actually been with them for about 10 years, just in the latest fund for 3. Should have made it clearer. Returns have been average, I certainly haven't benefited from the active management 'upside'. And this is before I take into account the fees. I think it would benefit from an external review, will read the sticky at the top of the forum.

The IM sticky is a good read, but it has also grown to become very long and covers a wide range of subjects.

If you just want an evaluation on the points that concern you it might be an idea just to email Nik directly.

It does appear that you are paying £4,000 a year for a 90 minute meeting, unfortunately.

[financialbloke]

edited.

Edited by financialbloke on Tuesday 7th January 23:03

[seapod]

Thank you for your input everyone. I have booked a meeting with a different IFA, I am likely to go down the paid advice route as I need/want it, rather than them consistently dipping into the fund, whether I am getting advice or not.

I'll report back in 5 years!