Pensions – think I'm being scammed by my adviser

Just wanted a quick sanity check from any financial advisers out there. Wondering if this is ‘the oldest trick in the book’, or standard practice (I think the former).

Had my pension adviser over last week to discuss my plan, because I wanted to up my monthly contributions by a significant amount. He’s not independent, rather an adviser for a large wealth management company.

We chatted for about an hour, and got on pretty well. I asked him if I could set up an on-line account. He said yes, and went on to describe how my pension accounts would look on the screen. I queried why there would be ‘accounts’, and not just one account, and he said it would make sense to have a new pension set up in parallel with the first, so I could keep track of how each was performing. I said this seemed strange, as both would be invested in the same fund, but he basically said it would help me keep better track of my money, and brushed it off.

I’ve just got the paperwork through now for the pension, with all the jargon, and legal risk awareness stuff, and it turns out there’s a 4.5% p.a. advice fee for all contributions made in the first 5 years, amounting to a few thousand pounds, which pays for the initial advice. I have already had my original pension for more than 5 years.

I think I know the answer to this, but I’m being stitched up like a kipper, aren’t I?

I’m not an advisor, but I’ve had plenty of pension plans, and that sounds like a complete rip-off.

I would stop having anything to do with these people.

He’s on commission,there’s no commission on just increasing your contribution,he needs it to be seen as a new sale so he can make money,or the short answer is yes.

That’s pretty unethical, isn’t it.

Is it actually illegal to mis-sell something so deliberately?

I’m feeling pretty gutted about this, he has been our mortgage adviser for 13 years, and someone I thought I trusted. Grrr

I think there’s some sense in having different pension pots, especially now you have more options for taking cash, draw down, annuities etc. at different ages.

But yeah, that sounds like a rip off. I’d be on the phone to the company to ask.

Yes, boot his balls on the way out.

And how much is the ongoing charge after the 1st 5 years?
If you know where you want to put the money (though just one fund is daft!), can you not do it with Hargeaves Lansdowne, Charles Stanley , etc?

Apologies Reuben, the pension isn’t one fund, it’s in a ‘managed funds portfolio’ made up of 7 different funds, but both pensions would have the same % invested in those 7 funds, so essentially identical, just different monthly payment amounts.

I am not that savvy with investments. Think I’ll go and check out those companies you mentioned. Cheers

Check out AJ Bell YouInvest too. Other people will have further advice. Typical charges for a SIPP are 0.25% – 0.45% pa plus the fund charges. Due to buying in bulk they can usually eliminate entry and exit charges (Often 5%) sometimes paid by retail investors.
Did your advisor mention these?

And how much is the ongoing charge after the 1st 5 years?

The small print on charges…

“The charge for our initial advice is 4.5% of the amount you invest in the first five years and for on-going advice 3% of each contribution you make after the initial advice has been paid for and an annual charge of 0.25% a year. The charges for the product are 1.5% for the amount you invest in the first five years plus 3% of each contribution you make after the initial advice has been paid for and an annual charge of 1% a year which will in effect be waived for the first six years that each contribution is invested”.

When I asked about the charges, he said it was 1.6%p.a that comes straight out of the pot.

Did your advisor mention these?

No, he didn’t mention exit fees at all.

Ooh yes, regulated complaints 🙂 write to the chief executive direct asking for full preview of all investments because you think you have been missold one or multiple products. Then go to the ombudsman if not happy with response

No, he didn’t mention exit fees at all.

They may not be payable…
If you go to https://www.charles-stanley-direct.co.uk/Our_Services/ f’rinstance you can check your funds’ charges if, as they probably are, dealt with by CS.

If you search for your fund in the “search” box you may end up with a screen like this:

https://www.charles-stanley-direct.co.uk/ViewFund?Sedol=0601492&Isin=GB0006014921&PreviousSearchResults=%2FInvestmentSearch%2FSearch%3FSearchText%3Dbaillie%2520gifford%2520japanese%2520smaller%2520companies

Click on the “Documents” tab and you will see a “Key Investor Information Document” box.
Click it and read the charges for that fund.
These are in addition to your wealth manager’s fees. Some have entrance charges, some have exit charges, and some have performance fees, but they all have an annual ongoing fee. The big brokers can cut a deal with the fund managers, removing most of these. Investing can get expensive with the wrong manager. It’s not St James is it?

If you want some top class opinions, of which one, unlike here, might be right, go to

http://forums.moneysavingexpert.com/forumdisplay.php?f=17

There are exit fees in the documentation, so I am aware of them now (6%, decreasing by 1% each year until 0%). He didn’t mention them when I met him though.

It’s not St James is it?

😉
Why do you ask?

They’re one of the more expensive wealth managers, to be polite…

Is there a “free” cancellation period ?

Thanks for the heads up on St. James SR, I just bailed out on them having signed up but getting cold feet in the cooling off period. It’s a minefield out there and you know it’s going to go the same way as endowment mortgages and PPI.

Bollox, my pension pot is with st James. May have to review that I think. Wish it was easier to sort this pension lark out, bloody minefield it is!

You are paying 6% pa for ever on those numbers you have given us! Why can’t you just increase monthly contributions on the original fund, or are you paying 6% on that too?

Just open your own account and invest into the same funds e.g. with hl.co.uk etc

You are paying 6% pa for ever on those numbers you have given us! Why can’t you just increase monthly contributions on the original fund, or are you paying 6% on that too?

I wanted to just add to the original pot, but he said it would be better to do a new one!! Sad thing is, I have only just realised but yes, I’ve been paying these charges for the last 7 years on the original pension.

It’s crazy isn’t it. He told me when I met him that the charges were 1.5% p.a., on the pot (but it turns out this is just the product charges).

I have just looked at the projections…

My additional contribution is £1200 pm, so for a retirement at 67 (315 months), I will have contributed £378,000, just from this extra payment.

The projections show that increase at the ‘lower rate’ would yield £204,000 (a loss of £174,000)

Even at the ‘mid rate’, I would stand to lose £70,000 of my pot.

And this is from one of the biggest pension providers in the country!

Went to a pensions adviser here in the snooty Ribble Valley and they wanted £2000 just to sign us up!

There is a genuine problem with financial advice in that good advice from a skilled adviser costs money and people don’t want to pay up front for that, hence the murky world of kickbacks on financial products….

I think I might just have to start paying up front for some of that advice.

I’ve just signed up for an account with HL (cheers Footflaps). I’ll look into it over the next week and see what I can set up / transfer.
From what I can tell, the funds there generally have 0 – 1% start up fee and typically <1% on-going charges, which seem much fairer.

I feel like a right muppet.
Cheers folks 🙂

I think I might just have to start paying up front for some of that advice.

Maybe. There is a growing trend towards IFAs making a one off charge for advice, rather than an ongoing percentage.
The next stage might be to see whether your Wealth Manager’s selections have been doing the business, and look like they may continue to do so. They’re not necessarily the same thing!

I’m also looking at a new pension fund right now, talking to an advisor from SJP

Actually the advisor works as an agent for something for someone else, so 2 steps removed from them! Presumably everyone takes a cut.

They’ve offered me 1.8% p.a. on the whole value of the fund. That’s tied in for 6 years, if we pull out in that time there are exit fees. After that I think the exit fees are zero, although from reading the above I need to check!

Although it’s less than what people are saying above, it’s still higher than hl and others out there. Does anyone know if it’s feasible to negotiate this?

Also it still really depends on how their particular fund performs, and obviously they’ll say theirs are better than everyone else. They’ve shown us graphs which are after deducting the fees, average growth over 10 years of 5% p.a. is that good? Most of that is pre-eu ref though, since then it’s been all over the place, and overall no growth in the last year

That’s a rip off, I’m an independent wealth manager and have helped a few folk on here.

Give me a call tomorrow and I can give you some pointers and possible options. If it is St James Place they are expensive and can only advise on their own products. Number is 0794977nineninetwofour

Alan

St James Place are ridiculously expensive but pull a lot of people in because their ‘advisers’ are incredibly good sales people. What he was suggesting does sound somewhat devious and I would investigate his rationale for suggesting a new plan further. Hargreaves et al are excellent if you’re happy you know what you’re doing from an asset allocation point of view and you’re comfortable understanding broad market movements. There are firms in between which have grown from traditional stockbroking businesses who can provide advice on the investments if that is something you are more comfortable with. As someone who works at one of the traditional broking businesses that is now very much investment management we see a lot of Hargreaves etc clients who have been lured in by their own temptation into taking too much risk and paid the consequences.

So, Hargreaves are good but don’t ignore the option of advice if choosing your own investments is not something you are comfortable doing. On a fund based structure given the typically low turnover it really doesn’t cost much more to go with an advisory investment manager these days given the relatively recent changes to the Hargreaves charging structure.

average growth over 10 years of 5% pa

Their funds are no better than anyone else’s, partly because they largely repackage existing fund managers vehicles ie Woodford manages several billion for them. Their charging structure is more likely to create a drag on performance.

average growth over 10 years of 5% pa

I’d be pretty disappointed with that, but I’d be even more disappointed with nowt over the last year. We had the Chinese wobble this time last year, but since Christmas it’s been pretty damn good!

St James have some smart and well qualified “partners”, I know a few who have moved to work for them from other areas of finance.

OP I am rather surprised at the large losses in the low growth scenario, are you sure the calc is correct ?

FWIW have a look at Standard Life too

If you are not happy with current provider you can transfer elsewhere, again look at fees. As above I think a letter to CEO is worthwhile re the tactics employed

A 50% ish return over 5 years taking their advice. Yet if you had invested directly in St James Place shares 10 years ago you would roughly have tripled your money.
They’re doing alright.

And OP

Are you maxing out yours and the better half’s ISA allowances ?

There’s an argument that you should… rather than pouring all your savings into pensions

Im with SJP and have been meaning to move it for ages…. your thread has reminded me … ta

Good luck

There’s an argument that you should… rather than pouring all your savings into pensions

Ok, but a question: as a Director of a Limited business I can get the business to ‘invest’ money straight into my private pension (saving tax, NI, corp tax etc), but wouldn’t money into an ISA have to go in from my net?

Ok, but a question: as a Director of a Limited busines…

That’s the position I am in too. It’s hard to see past anything but a pension, with all contributions coming through the company rather than from my salary. That’s always put me off any kind of ISA or personal savings.

Ok, but a question: as a Director of a Limited business I can get the business to ‘invest’ money straight into my private pension (saving tax, NI, corp tax etc), but wouldn’t money into an ISA have to go in from my net?

Yes, but you can’t access your pension until you’re 55. You can call on your ISA at any time should you need to, totally tax free.
The govt is unlikely to monkey about with ISAs, but they seem to move the Pension goalposts willy nilly.
As usual, diversity is the key.

More tax efficient putting money into a Pension.

More tax efficient taking money out of an ISA

Swings and roundabouts

Build up the ISA balance so that once retired you got a decent amount you can invest into income generating products, to then be able to have that income tax free ….. as opposed to having to pay tax on pension income (after personal allowances etc)

On the SJP thing – currently having a review with the chap recommended on STW (5th post in this thread – Simon Kearsley) who’s linked to SJP. Follow up session next week so will check out their fees, but seemed reasonable when we first chatted a few weeks back (around the 1% ish)…

http://singletrackworld.com/forum/topic/financial-adviser-recommendations-manchester

Had a meeting a few months ago with my financial adviser/personal bank manager.
Came out feeling i’d been talking to a used car salesman.The guy did not have a clue about investments.Turns out he later left to pursue a career well outside banking.
It was probably the push i needed to look at self investing and thats what i’ve done.

More tax efficient putting money into a Pension.

Definitely, if you’re a higher rate tax payer:

1) You get 40% back on the contributions which means you’re investing out of your gross income into the pension
2) At 55 (depends on your age) you can take 25% tax free
3) The pension itself will be taxed, but as it’s likely to pay out less than you originally earned, you’ll be paying less higher rate tax

The only complication is once your total pension pot gets to £1m the tax rate jumps up, so it gets more complex…..