Reply to: Pensions - IFA or Private

[Lance]

Thanks for the replies...In general, what are your opinions of IFAs? Worth the money?

They're not all bad. Most horror stories are based on when they sold products that seemed suitable at the time (endowments being a classic example as they were good in times of high inflation, but with low inflation they turned out terribly). It's much more heavily regulated now, and the advice will cost you some money.

Whereas a SIPP has no (or very little) advice so the fees are for fund management only.
And some SIPP providers are getting screwed for mis-selling as well.

Make sure there is no trail commission and make sure they get the lowest fees. The fees will likely be greater than with a SIPP, but not much more.
Fees of 1% are far, far too high. You want to be aiming at 0.5% or lower.

[Fred Bloggs]

Remember that quite often platform charges are on top of fund management charges which can vary from fund to fund, so it's quite easy to choose a fund via HL and end up paying total charges >1.25%

There is a specialist deal done by a certain membership organisation on behalf of contractors where total charges (platform and fund) are 0.43% but we've been forbidden from telling you where that deal might be found.

Yes, you're right. But you Cherry picked the parts of my post that suit you. And if you choose to hold company or investment trust shares in a SIPP, the charges are different again at each provider. My recommendation to the OP is to look at all the options, including the one you can't mention by name. And then decide.

[IPSE]

Plus platform costs. HL = 0.45%, doesn't sound a lot? I was paying ~£120 a month before I moved my SIPP to II.

Remember that quite often platform charges are on top of fund management charges which can vary from fund to fund, so it's quite easy to choose a fund via HL and end up paying total charges >1.25%

There is a specialist deal done by a certain membership organisation on behalf of contractors where total charges (platform and fund) are 0.43% but we've been forbidden from telling you where that deal might be found.

[kaiser78]

IFAs have a wider choice of funds to choose from though and also 'expert' knowledge to move funds around etc, so would rather use them then a standard platform. From what I have seen in the past, sometimes the more obscure funds can provide the greatest returns...

[Fred Bloggs]

whs x10

IFA + fund management charges could easily be eating 25-50% of your total returns, compound that by 20 years and its a huge amount of money to bet that they can get you a better return than the index (especially when 80-90% do worse after costs are taken into account over 15-20 year periods)

Plus platform costs. HL = 0.45%, doesn't sound a lot? I was paying ~£120 a month before I moved my SIPP to II.

[lukemg]

You pay fund managers for that. You want an IFA to pick your fund managers? Go right ahead, it will cost you an arm and a leg. All the information is on the web, it's never been easier to run your own SIPP investments.

whs x10

IFA + fund management charges could easily be eating 25-50% of your total returns, compound that by 20 years and its a huge amount of money to bet that they can get you a better return than the index (especially when 80-90% do worse after costs are taken into account over 15-20 year periods)

[Fred Bloggs]

IFAs are like personal trainers. You don't need them for anything but if you are happy to pay someone to make decisions for you, why not?

You pay fund managers for that. You want an IFA to pick your fund managers? Go right ahead, it will cost you an arm and a leg. All the information is on the web, it's never been easier to run your own SIPP investments.

[filthy1980]

I know two IFAs personally and one set my pension up. Neither of them talk about money like we do, or anyone else for that matter but I do know both of them are very comfortable now and most certainly will be when they retire. I've got money in the same funds as one of them. Thing is you need money to make money and they don't exactly make a fortune from their wages. A lot of their wealth is tied up and yet to be realised.

Just because an IFA hasn't got a Jag outside the office I wouldn't assume they are not well off.

My IFA did have a beautiful old Jag with a private number plate . . . seems fairly comfortable

[SimonMac]

Thanks for the info, really useful! Out of interest, what are people's opinions of IFAs?

For a bit of balance when I transferred my pension into a HL SIPP they insisted that I had an IFA look at my decision, which I ignored as he suggested not transferring it, but I had already worked out what I wanted to do so was just a box checking activity.

If you are confident in what you are doing, then you don't need to follow advice, but as with everything you get what you pay for, I had to get the advice so found the cheapest one around.

As for SIPP with HL and fee, it depends what you want to do, I have only shares in my SIPP and pay a flat fee of £200 a year which makes it one of the cheapest around, if you just want an easy life and are thinking funds only then it is more expensive the more you have in there.

[northernladuk]

IFA's ????
- If they are so smart, how come they aren't rich ?
- Where is their money invested ? How is that doing compared with a global index fund ?
- ONLY purpose I can see is to protect people from themselves (IF you find a good one - you wont know till its too late...)

I know two IFAs personally and one set my pension up. Neither of them talk about money like we do, or anyone else for that matter but I do know both of them are very comfortable now and most certainly will be when they retire. I've got money in the same funds as one of them. Thing is you need money to make money and they don't exactly make a fortune from their wages. A lot of their wealth is tied up and yet to be realised.

Just because an IFA hasn't got a Jag outside the office I wouldn't assume they are not well off.

[lukemg]

It is SIMPLE, but not easy...

HL.co.uk.
SIPP.
Vanguard Lifestrategy 80% shares fund.
Direct payment from Ltd Co to SIPP.
Invest equal amounts monthly regardless of noise or market level.
Never sell regardless of noise or market level.
Check the value as rarely as you possibly can (once a year is fine).
Wait 15 years and if you have invested enough (depends on lifestyle obvs), there is a good chance full-time work will be optional...

IFA's ????
- If they are so smart, how come they aren't rich ?
- Where is their money invested ? How is that doing compared with a global index fund ?
- ONLY purpose I can see is to protect people from themselves (IF you find a good one - you wont know till its too late...)

[Cirrus]

IFAs are like personal trainers. You don't need them for anything but if you are happy to pay someone to make decisions for you, why not?

[Fred Bloggs]

Just a slight word of warning. Whilst HL do in fact recommend some good funds, they only push funds when they have a reason to do so. Their reasons for pushing funds are not transparent, they have been asked about it and refuse to discuss with clients. Many funds pushed hard by HL turn out to be real duds (look up Psigma Income for example). Take their recommendations with large pinches of salt. As a starter for 10 look at the videos by Terry Smith on the Fundsmith website. In one of his videos he has a lot to say about HL and their HL 150. HTH.

[handyandy]

Waste of time and money. Had one bad experience which led to a mis-selling claim. Never again.

Totally agree but be aware that investing large amounts of money is not simple and there are lots of pitfalls - that's why IFA's are reccomended everywhere as they are meant to stop total disasters due to clueless investors getting duped.

So - don;t use an IFA but do educate yourself and do some research before jumping into anything big. Try asking fellow contractors at a similar age/life stage to yourself what they do. Also browse the websites of the two SIPP providers mentioned on here.

Personally I used an IFA twice and then realised they do bu**er all for their money so I opened ISA and SIPP accounts with Hargreaves Lansdowne and used their research plus talking to others in order to decide what to invest in.

In general there are two elements to a pension for a contractor -

1. There is a wrapper (in my case a SIPP) which is like a tax fee savings account - you (or your employer/LTD) pay contributions into it. There are limits on this and it can get complicated if you earn a lot of money (i.e. over about £120k per year) but in general the limit is £40k per year on contributions. When you contribute to this SIPP wrapper the money just sits there until you invest it in something that will make a return - that's element...
2. You can then invest amounts of the money in your SIPP account into a whole bunch of investments. Individual shares if you want to, or bonds, or some other classes of asset (like commercial property). Or you can in vest it in funds which in turn invest in stocks, shares, bonds, other assets (even gold, oil, etc.). Funds are meant to be a simple way for you to buy investments without needing to deal directly - with a fund you pay a fund manager to make those decisions for you and to manage the fund within a certain risk profile. However, there is no such thing as risk free (unless you buy government bonds).

Element 1 is simple and you could set yourself up now with a reputable SIPP provider (check the charges as a previous poster said) and pay money in. Element 2 (deciding where and how to invest your money so that it grows) is much harder. But I'd seriously suggest that you learn this and take an interest in your savings, learn about risk and what level you are comfortable with (respectfully I suggest you stay away from risk stuff and keep it simple to investment you understand until you have built you fund up).

Also don;t forget other ways of saving and investing - ISA's are good and you should always have a nice chunk of cash available in case you are out of work for 6 months. Spread any savings you have around and avoid some of the doom mongers who say all these ways of savings are scams by the government and you should throw everything into buy to let. On the savings front always put yourself around and be a tart. Finally, most important thing of all, remember to spend some money too so you can enjoy yourself now.

Good luck.

[Fred Bloggs]

Thanks for the info, really useful! Out of interest, what are people's opinions of IFAs?

Waste of time and money. Had one bad experience which led to a mis-selling claim. Never again.