As Chase de Vere announces a massive increase to its hourly charge for advice, you can cut your costs, as you’ll see below
Advice Charge Rockets By 25 Per Cent
How Do You Feel About Paying £250 Per Hour?
In a month when the annual inflation rate fell to a recent low of two per cent, the national independent financial adviser (IFA), Chase de Vere, increased its hourly charge for advice by an incredible 25 per cent to £250. Its charge for administration support rose to £80 per hour.
Patrick Connolly, who’s in charge of communications at Chase de Vere, said: “Following a review of our charges last year in relation to other charges in the market, and to ensure they are viable for us and continue to offer good value for our target clients, we have increased our hourly fees.”
According to unbiased.co.uk, the independent online resource which can help people find an IFA, standard fees for an adviser range from £75 per hour to about £250 per hour, with £150 per hour being about the average.
Advice charges relating to SIPPs and SSASs are at the higher end of the scale, especially as many of the more reputable IFAs who specialise in this niche area are Chartered Financial Planners.
Paying By The Hour Isn’t The Only Option
Prior to January 2013, IFAs were mostly paid commission. Typically, this was 3% for providing advice and putting in place the recommendation. And up to 1% per year for annual servicing, though evidence suggested that many advisers collected this annual income without offering much of an on-going service in return.
Having concluded that receiving commission for selling pension and investment products might skew the advice, the regulator banned it. But rather than insist IFAs charge for advice on an hourly rate, the regulator stopped short of aligning IFAs with other professionals, like accountants and solicitors, by allowing them to charge on a ‘percentage of the fund’ basis. Here’s its factsheet for IFAs on the subject of the charge for advice.
Patrick Connolly confirmed that most of Chase de Vere’s business is currently charged on a ‘percentage of the fund’ basis. What’s interesting is that the charge is 3% initially, and 1% per year on an on-going basis.
That’s exactly the same as the commission levels prior to the regulator’s change in rules! Mmmmmm!!!!
As many SIPP and SSAS holders have funds running into hundreds of thousands of pounds, you could be paying thousands of pounds for advice.
Think about it. If you have £100,000 to invest, would it really take an IFA twice as long to provide the advice if you have £200,000? Chances are the advice would be to increase the amount you’d invest in each area, rather than increase the number of areas.
For people with larger funds, it’s quite possible that paying for advice on a ‘percentage of the fund’ basis could be far more costly than paying by the hour for the actual work done.
Check You’re Not Paying Over The Odds
There’s nothing wrong with paying for advice on a ‘percentage of the fund’ basis, providing you actually do get value for money. It’s very easy to check.
When you receive the invoice from your IFA confirming the fee you’ve been charged on a ‘percentage of the fund’ basis, ask for a time-costed schedule too. It should itemise the following:
- What work was carried out
- Who carried out the work, be it the IFA or one of the support staff
- How long it took for each task
If you’ve paid less on the ‘percentage of the fund’ basis, that’s great. But if you would have been better off paying by the hour, you should switch. It shouldn’t be an issue, for as it confirms in the regulator’s document which you can download above, it’s the IFAs responsibility to be open and transparent, and to treat its customers fairly.
How To Cut Your Charge For Advice
Good news. ‘Caveat emptor’ is out!
It used be a case of “let the buyer beware”. But with a virtually unlimited amount of information available online, nowadays, it’s very much a case of “let the seller beware”. Consumers are much more informed, for almost everything.
In fact, when it comes to ‘self-invested pensions’ like SIPPs and SSASs, investors have a surprising level of knowledge. After all, this sort of pension already requires the holder to take a self-interest in the investment choices regarding the money in their pensions. But sometimes, it’s appropriate to seek the opinion of a suitably qualified adviser.
In the main, SIPP and SSAS holders don’t want an IFA to tell them where to invest their money. In most cases, they became affluent because they made financial decisions themselves. But there’s nothing wrong with talking with an experienced professional to verify you're making the right choices.
Here’s The Easiest Way To Cut Your Charge For Advice
Get your knowledge up to speed through many of the wonderfully informative free resources online. Whatever your investment preferences, you’ll find a myriad of help, guidance and opinions from all manner of experts. As Sir Francis Bacon said: “Knowledge is power”. In this case, knowledge can save you a lot of money too.
Once you’ve worked out what investment opportunities interest you, if you need a little reassurance that you’re on the right lines, that’s the time to seek the opinion of an independent pension specialist focusing on SIPPs and SSASs.
You’ll slash the cost of your charge for advice. For it’s likely you’ll only need an hour or two of the IFAs valuable time to assess your suggestions, and check they meet your investment aims, in line with your view of risk.
And that’ll mean you’ll keep more of your hard earned money where it belongs. Out of the pocket of a higher charging adviser and in your pension scheme, growing for your retirement.
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Over time, charges can wipe out a huge part of your fund. We like AJ Bell because there are no set-up costs. If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund. And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
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