Pensions - DIY or IFA

lesfirth · December 2017

I was in the car trade and I know it has its share of rogues. However IMHO the rogues in the car trade are rank amateurs compared to the many rogues in financial services. Tread very carefully.

FishFish · December 2017

I assume that you have a SIPP or you are trying to create one by transferring a pension in to a SIPP. So your pension is either with a pension company or is some savings just in the bank.
You can transfer either into an investment fund such as Hargreaves Lansdown and then DIY into hundreds of funds and all the equities on LSE and, I think , world stock markets. They have cheap access to various funds - such as European or Asian all the choice will be there.

Look at what you are trying to do - are you not just asking the IFA for the best option or to make you rich or to teach you how to invest? Three to six months effort on your own studying and pretending to invest and watching performance relative to index tracking funds will get you to a good position to make your own choices.

Fees are inevitable. Costs £10 to do a share deal and then some for the tax on the deal so don't get lost on fees as being the issue. Also with the professionals then they will probably steer you to established funds which you could discover yourself - easily - but may be that getting them from an IFA is in the round cheaper.

I know that HL and others like them also tell you your actual gain or loss after all costs rather than delude you with false profits which exclude dealing charges.

My advice would be to do it yourself but subject to the constraint that you don't touch high risk investments such as difference trading or options and also consolidate all your funds to make it easy to track what is going on and keep 25% as cash for the time being for opportunistic investment.

But if your money is in a pension fund now then leave it there for a while whilst you learn what to do.

FishFish · December 2017

Rick Chasey wrote:

Unless I'm mistaken, none of us are qualified or really allowed to offer advice.

But, bluntly, unless your profession is pensions, why would you free style it in an amateur fashion?

This is your pension, not some broken cabinet in your living room you can bodge.

I agree but some people are competent to offer advice.

robert88 · December 2017

It's perfectly simple:

Where bitcoin sits is probably extremely sharp.

vimfuego · December 2017

I'm a Compliance Officer with a Financial Services firm & have worked in the pensions industry for 20 years - started in the Pension Review sorting out the mess that was the mis-selling scandal when personal pensions were created and mercilessly flogged to all & sundry.

Anyway, there's a lot of good points above. Of course, it depends. On a multitude of factors. What are you trying to achieve? what is your knowledge like at the moment?, are you willing to put in the hours to fully understand the options available in terms of a suitable product and the underlying investments, make an informed decision & then monitor the outcomes and adjust your strategy as necessary? If yes, and IF you fully understand the investment risks involved (and it does all boil down to the fact that you are carrying the investment risk, so if we are talking about the main chunk of your future retirement provision, then don't f*ck about with it without being absolutely certain that you understand what you are doing) then crack on, you are free to make your own choices and decisions.

However, if you are an inexperienced investor, or if you are unsure or unwilling to do adequately research and monitor your solution, then you probably need some form of guidance or financial advice. Whilst levels of trust in the industry are low, good professional advice is invaluable - it's a matter of finding a good, reliable and honest advisor (again, will require time and research) & accepting that whilst "advice" is a bit intangible, it's going to require you putting your hand into your pocket. Good advice will probably cost you, but like they say, if you pay peanuts, you know what you'll get. If you've taken advice, then you also have recourse to the Financial Ombudsman Service in the event that you are misled or mis-sold something (or if ultimately you were not actually in an informed enough position post advice to have understood what you were getting and/or the risks involved). If you self select, you won't get that protection.

On another note I spend a lot of my time investigating pension scams at the moment (usually when pension scheme members are encouraged to transfer out of an occupational scheme & into a SiPP or some overseas arrangement to take advantage of some amazing investment opportunity or to access their cash prior to age 55 (all absolute BS)) and I've seen some horrendous cases where people have lost all of their savings (and very few people have enough pension savings as it is). So, on the investment front, stick to mainstream investments. If you don't understand it, don't invest in it. Don't try to "time" the market either, it's a mugs game (if it was that easy we'd all be millionaires).

Good luck with whatever strategy you go with - there's no right answer. Just think it through fully and don't make any decisions without being really confident that you've explored & understand all of the risks involved. There's no such thing as a free lunch - big returns = big downside risk also.

kingstongraham · December 2017

Robert88 wrote:

Where bitcoin sits is probably extremely sharp.

Bitcoin is (currently) purely a vehicle for speculation. I don't think anyone is buying bitcoins with any aim other than selling before the crash.

FishFish · December 2017

Robert88 wrote:

It's perfectly simple:

Where bitcoin sits is probably extremely sharp.

Well it is not. That is the options you have when you have worked out your personal utility function.

surrey_commuter · December 2017

vimfuego wrote:

I'm a Compliance Officer with a Financial Services firm & have worked in the pensions industry for 20 years - started in the Pension Review sorting out the mess that was the mis-selling scandal when personal pensions were created and mercilessly flogged to all & sundry.

Anyway, there's a lot of good points above. Of course, it depends. On a multitude of factors. What are you trying to achieve? what is your knowledge like at the moment?, are you willing to put in the hours to fully understand the options available in terms of a suitable product and the underlying investments, make an informed decision & then monitor the outcomes and adjust your strategy as necessary? If yes, and IF you fully understand the investment risks involved (and it does all boil down to the fact that you are carrying the investment risk, so if we are talking about the main chunk of your future retirement provision, then don't f*ck about with it without being absolutely certain that you understand what you are doing) then crack on, you are free to make your own choices and decisions.

However, if you are an inexperienced investor, or if you are unsure or unwilling to do adequately research and monitor your solution, then you probably need some form of guidance or financial advice. Whilst levels of trust in the industry are low, good professional advice is invaluable - it's a matter of finding a good, reliable and honest advisor (again, will require time and research) & accepting that whilst "advice" is a bit intangible, it's going to require you putting your hand into your pocket. Good advice will probably cost you, but like they say, if you pay peanuts, you know what you'll get. If you've taken advice, then you also have recourse to the Financial Ombudsman Service in the event that you are misled or mis-sold something (or if ultimately you were not actually in an informed enough position post advice to have understood what you were getting and/or the risks involved). If you self select, you won't get that protection.

On another note I spend a lot of my time investigating pension scams at the moment (usually when pension scheme members are encouraged to transfer out of an occupational scheme & into a SiPP or some overseas arrangement to take advantage of some amazing investment opportunity or to access their cash prior to age 55 (all absolute BS)) and I've seen some horrendous cases where people have lost all of their savings (and very few people have enough pension savings as it is). So, on the investment front, stick to mainstream investments. If you don't understand it, don't invest in it. Don't try to "time" the market either, it's a mugs game (if it was that easy we'd all be millionaires).

Good luck with whatever strategy you go with - there's no right answer. Just think it through fully and don't make any decisions without being really confident that you've explored & understand all of the risks involved. There's no such thing as a free lunch - big returns = big downside risk also.

This is a very good post. To make it even better would you be happy to post up questions that forumites should be able to answer yes to to make them competent to manage their own pension? ie help them understand what they don't know. A couple that spring to mind are?

Do you currently look after a hundred thousands of your own investments?
How will your investment profile change as you near retirement?

bianchimoon · December 2017

Surrey Commuter wrote:

vimfuego wrote:

I'm a Compliance Officer with a Financial Services firm & have worked in the pensions industry for 20 years - started in the Pension Review sorting out the mess that was the mis-selling scandal when personal pensions were created and mercilessly flogged to all & sundry.

Anyway, there's a lot of good points above. Of course, it depends. On a multitude of factors. What are you trying to achieve? what is your knowledge like at the moment?, are you willing to put in the hours to fully understand the options available in terms of a suitable product and the underlying investments, make an informed decision & then monitor the outcomes and adjust your strategy as necessary? If yes, and IF you fully understand the investment risks involved (and it does all boil down to the fact that you are carrying the investment risk, so if we are talking about the main chunk of your future retirement provision, then don't f*ck about with it without being absolutely certain that you understand what you are doing) then crack on, you are free to make your own choices and decisions.

However, if you are an inexperienced investor, or if you are unsure or unwilling to do adequately research and monitor your solution, then you probably need some form of guidance or financial advice. Whilst levels of trust in the industry are low, good professional advice is invaluable - it's a matter of finding a good, reliable and honest advisor (again, will require time and research) & accepting that whilst "advice" is a bit intangible, it's going to require you putting your hand into your pocket. Good advice will probably cost you, but like they say, if you pay peanuts, you know what you'll get. If you've taken advice, then you also have recourse to the Financial Ombudsman Service in the event that you are misled or mis-sold something (or if ultimately you were not actually in an informed enough position post advice to have understood what you were getting and/or the risks involved). If you self select, you won't get that protection.

On another note I spend a lot of my time investigating pension scams at the moment (usually when pension scheme members are encouraged to transfer out of an occupational scheme & into a SiPP or some overseas arrangement to take advantage of some amazing investment opportunity or to access their cash prior to age 55 (all absolute BS)) and I've seen some horrendous cases where people have lost all of their savings (and very few people have enough pension savings as it is). So, on the investment front, stick to mainstream investments. If you don't understand it, don't invest in it. Don't try to "time" the market either, it's a mugs game (if it was that easy we'd all be millionaires).

Good luck with whatever strategy you go with - there's no right answer. Just think it through fully and don't make any decisions without being really confident that you've explored & understand all of the risks involved. There's no such thing as a free lunch - big returns = big downside risk also.

This is a very good post. To make it even better would you be happy to post up questions that forumites should be able to answer yes to to make them competent to manage their own pension? ie help them understand what they don't know. A couple that spring to mind are?

Do you currently look after a hundred thousands of your own investments?
How will your investment profile change as you near retirement?

Second this, some excellent, helpful advice from most people, just as a forum should be. I've been on some financial forums for advice, as well as speaking to an IFA and my existing provider. It's all helping to focus me a lot more, hope it helps any people who find themselves wondering if their pensions are doing as well as they could.

bianchimoon · December 2017

FishFish wrote:

I assume that you have a SIPP or you are trying to create one by transferring a pension in to a SIPP. So your pension is either with a pension company or is some savings just in the bank.
You can transfer either into an investment fund such as Hargreaves Lansdown and then DIY into hundreds of funds and all the equities on LSE and, I think , world stock markets. They have cheap access to various funds - such as European or Asian all the choice will be there.

Look at what you are trying to do - are you not just asking the IFA for the best option or to make you rich or to teach you how to invest? Three to six months effort on your own studying and pretending to invest and watching performance relative to index tracking funds will get you to a good position to make your own choices.

Fees are inevitable. Costs £10 to do a share deal and then some for the tax on the deal so don't get lost on fees as being the issue. Also with the professionals then they will probably steer you to established funds which you could discover yourself - easily - but may be that getting them from an IFA is in the round cheaper.

I know that HL and others like them also tell you your actual gain or loss after all costs rather than delude you with false profits which exclude dealing charges.

My advice would be to do it yourself but subject to the constraint that you don't touch high risk investments such as difference trading or options and also consolidate all your funds to make it easy to track what is going on and keep 25% as cash for the time being for opportunistic investment.

But if your money is in a pension fund now then leave it there for a while whilst you learn what to do.

Thanks FF, i totally get where you're coming from, good advice, appreciated!

bianchimoon · December 2017

Just spoken to another IFA, who wouldn't take a one off fee for advice (that's two), seems they want to manage my affairs on a monthly basis. Correct me if I'm wrong but seems to me, that they can be picky and choosy at the moment about who they work for, so basically it's an ongoing fee or we won't give advice. All of the government/banking/pension websites say seek IFA, easier said than done!

Does anyone know off the top of their heads what would be seen as a good annual performance % wise?

surrey_commuter · December 2017

bianchimoon wrote:

Just spoken to another IFA, who wouldn't take a one off fee for advice (that's two), seems they want to manage my affairs on a monthly basis. Correct me if I'm wrong but seems to me, that they can be picky and choosy at the moment about who they work for, so basically it's an ongoing fee or we won't give advice. All of the government/banking/pension websites say seek IFA, easier said than done!

Does anyone know off the top of their heads what would be seen as a good annual performance % wise?

that is an unaswerable question as it depends upon your investment mix which should depend upon your attitude to risk and your proximity to retirement.

a more helpful answer is that there will be benchmarks available for each asset class. You should also be looking at the underlying investment strategy and the individuals managing your money (they can leave)

orraloon · December 2017

Your prospective IFAs are offering an active management service for a % annual fee. You need to satisfy yourself that the additional cost of active management is outweighed by a greater return vs a passive management approach, e.g. the low cost tracker funds. Copious analyses and arguments pro and con available via a google or 2. Watch out for 'churn' costs in an active programme, each purchase and sale within a portfolio attracts additonal costs.

SC makes good points on risk profile. I would add that the old model of moving to 'safer' investments such as cash as you get nearer retirement was in part, not only, driven by a need to protect funds value at the specific point of retirement i.e. when one was obligated to convert the pension fund into an annuity as a once off transaction. Not good if say the stock market tumbled the day before your once in a lifetime purchase. Annuities remain an option, but drawdown models reduce the risk that bad timing gets you a bad deal.

bianchimoon · December 2017

orraloon wrote:

Your prospective IFAs are offering an active management service for a % annual fee. You need to satisfy yourself that the additional cost of active management is outweighed by a greater return vs a passive management approach, e.g. the low cost tracker funds. Copious analyses and arguments pro and con available via a google or 2. Watch out for 'churn' costs in an active programme, each purchase and sale within a portfolio attracts additonal costs.

SC makes good points on risk profile. I would add that the old model of moving to 'safer' investments such as cash as you get nearer retirement was in part, not only, driven by a need to protect funds value at the specific point of retirement i.e. when one was obligated to convert the pension fund into an annuity as a once off transaction. Not good if say the stock market tumbled the day before your once in a lifetime purchase. Annuities remain an option, but drawdown models reduce the risk that bad timing gets you a bad deal.

Having read up, discussed, had feedback from various sources, the drawdown model is the one I would want, I did want to pay a one off fee for advice and options with a Sipps, but IFA's aren't interested in doing this it seems

surrey_commuter · December 2017

bianchimoon wrote:

orraloon wrote:

Your prospective IFAs are offering an active management service for a % annual fee. You need to satisfy yourself that the additional cost of active management is outweighed by a greater return vs a passive management approach, e.g. the low cost tracker funds. Copious analyses and arguments pro and con available via a google or 2. Watch out for 'churn' costs in an active programme, each purchase and sale within a portfolio attracts additonal costs.

SC makes good points on risk profile. I would add that the old model of moving to 'safer' investments such as cash as you get nearer retirement was in part, not only, driven by a need to protect funds value at the specific point of retirement i.e. when one was obligated to convert the pension fund into an annuity as a once off transaction. Not good if say the stock market tumbled the day before your once in a lifetime purchase. Annuities remain an option, but drawdown models reduce the risk that bad timing gets you a bad deal.

Having read up, discussed, had feedback from various sources, the drawdown model is the one I would want, I did want to pay a one off fee for advice and options with a Sipps, but IFA's aren't interested in doing this it seems

when do you want to start drawing it down?

TheBigBean · December 2017

You need to split your pension choice into two parts: (i) the wrapper that makes it a pension in the eyes of the government and (ii) the underlying investments.

IFAs should be good at assessing which of the plethora of companies offer the cheapest solution to (i). That all comes down to fixed annual charges versus percentages. If you have lots of time on your hands, the maths isn't hard.

For (ii) I would absolutely not listen to an IFA. There is a danger that they believe an active manager can outperform a passive manager*. I would stick it in funds that match your risk profile and have very low charges. If you don't know your risk profile then an IFA may be able to help. There are plenty of mixed funds out there designed to change over time to match a retirement age.

*Any IFA that argues otherwise should be treated with extreme caution.

bianchimoon · December 2017

I've spoken to Hargreaves Lansdown, very interesting if not a little daunting going the SIPPs route, but something i feel i need to do after speaking to 2 IFA's with very limited success. They have a tool on their website that means I can do a ghost account and try different platforms to see how they perform in real time. Whilst all this is happening It's researching that will have to take up all of the spare time, just the thoughts and info that most of you guys are putting forward certainly makes me favour the SIPP route, just a matter of scaling that learning curve now!
Surry Commuter, in answer to your question 5 or 6 years

surrey_commuter · December 2017

bianchimoon wrote:

I've spoken to Hargreaves Lansdown, very interesting if not a little daunting going the SIPPs route, but something i feel i need to do after speaking to 2 IFA's with very limited success. They have a tool on their website that means I can do a ghost account and try different platforms to see how they perform in real time. Whilst all this is happening It's researching that will have to take up all of the spare time, just the thoughts and info that most of you guys are putting forward certainly makes me favour the SIPP route, just a matter of scaling that learning curve now!
Surry Commuter, in answer to your question 5 or 6 years

5-6 years is a very short timeframe until your first withdrawal. You should have enough money in cash/gilts to see out any stockmarket setback which could be 5-10 years. I only mention this as it makes fees that much harder to recover through improved performance

bianchimoon · December 2017

Surrey Commuter wrote:

bianchimoon wrote:

I've spoken to Hargreaves Lansdown, very interesting if not a little daunting going the SIPPs route, but something i feel i need to do after speaking to 2 IFA's with very limited success. They have a tool on their website that means I can do a ghost account and try different platforms to see how they perform in real time. Whilst all this is happening It's researching that will have to take up all of the spare time, just the thoughts and info that most of you guys are putting forward certainly makes me favour the SIPP route, just a matter of scaling that learning curve now!
Surry Commuter, in answer to your question 5 or 6 years

5-6 years is a very short timeframe until your first withdrawal. You should have enough money in cash/gilts to see out any stockmarket setback which could be 5-10 years. I only mention this as it makes fees that much harder to recover through improved performance

good point, will take that into account

campagman · December 2017

I learnt a lot about this by following some Personal Finance Blogs. Two that I would recommend are Monevator and 7 circles. Money Saving Expert has Investment and Retirement sections.

Pensions - DIY or IFA

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