Management charges.

[LizzieSiddal]

Does anyone know average Investment charges are? Dh and I have pensions through a IFA and our charges are 0.75% for the IFA then 0.45% management charge which is Royal London. Is this ok?

For background we’re both 57, only started a pension 5 years ago (stupid I know) and have been putting as much as we can afford in there. Have just had our yearly meeting and am shocked at how little the amount has grown.

Those charges sound about right. The Royal London one will be covering their admin plus fund management. The adviser charge is for ongoing advice.

Fund performance has generally been pretty dire.... I expect you made gains in years 1/2/3 but losses in 4/5. That's the way it goes sometimes.

@Sunseed thanks that’s reassuring re the charges. And yes you are correct we were doing ok the first few years. Finger cross things improve for everyone soon.

anything under 1% is OK.

hold on tight and things will recover but the last year has not been good for investments.

@parietal do you mean under 1% for the IFA charge or for the total charges?

It's fairly straightforward to invest in a passively managed portfolio from firms such as Wealthify (a subsidiary of Aviva), or Vanguard without an IFA, which would reduce charges.
Wealthify is quite popular with beginner investors as it's online questionnaire is designed to guide you to the most suitable investments. Charges for Wealthify - a flat fee of 0.6%, plus average fund charge of 0.16%.

It sounds “normal” for an advised service and actively managed fund. That doesn’t mean it’s value for money, as your returns won’t be any better than a passively managed fund with much lower fees.

Thanks @seekingasimplelife. I’m just too afraid to do it myself, we’ve got total pension funds of 260k at the moment and hope to double that within never few years (using up allowances from previous years) I wouldn’t sleep at night knowing Im the one making the decisions, but I will definitely have a look at those websites.

https://www.alandonegan.com/fees.html

this tool is useful for seeing the impact of fees on your investment.

At £260K investment, you're paying over £3,000 a year in charges.... ouch!!
Over 10 years, you lose £31K in charges, plus any potential growth from that loss.
That's what would be keeping me awake at night!

That is a lot in fees, but there also a lot of ways the IFA can add value:

A good IFA can help with all of the following.

1. Work out an initial target asset allocation that makes sense for the circumstances of the client, and potentially give advice on other changes the client might want to make that do not relate to asset allocation. "Circumstances of the client" is very broad; it includes family situation, employment situation, age, health, children, tax circumstances, hopes and dreams, plans to cope with various risks of life, as well as understanding the client's wealth, debts, income and expenses.
2. Work out the most sensible split among three types of "container": taxable accounts, pension-type accounts (eg SIPPs), and ISAs, as well as which asset classes to put in which "container" type.
3. Identify suitable funds for each of the asset classes, and a suitable investment platform or platforms. For most clients that will mean a platform that is easy to use and keeps the client money safe, and funds that have low fees and "do what they say on the tin" in terms of what they invest in. For some clients, that may also include particular tax optimisation strategies and/or particular investment strategies.
4. Stick with a sensible asset allocation through thick and thin. That means making some adjustments as circumstances change, but not being pushed into panic sales of asset classes that are down during market turmoil.
5. Review the client circumstances from time to time in order to update the target asset allocation and give further

If the client can do all of these things well enough for themselves, then they do not need an IFA. If the IFA is not doing all or at least most of these things, then they are not earning their fees.

If the IFA is doing all of the above then they will, in my opinion, add more than enough value to justify a 0.75% fee for most clients. Yes, the client could have gotten higher net returns by not paying that fee. However, that works only if the client can do these five things well without the IFA.