# Lowest charges for ARF



## Prudence (14 Oct 2017)

I am gathering information about purchasing an ARF in the next few months (for my husband, who is retiring at the end of January) and I am wondering whether there is any consolidated source of information about all the options for this and also what the various charges are for the options. I know that they are available from many, but not all, of the same providers as PRSAs, such as insurance companies and stockbrokers. 

I have searched this site and found some very helpful information about pension funds, but only a little about ARFs, although I'm sure some of the same information applies. For example, there is the Self-Directed option from Friends First, for which their literature gives a Fund Management Charge of 75bps, but it is hard to discern what other charges there may be. I learned on this AskAboutMoney site that for the personal pension, there is an additional option of 40bps + €120, but I don't know whether that also applies to the ARF. Also, the Davy self-directed option is 75bps for a PRSA but 90 bps for an ARF, so I'm wondering if it is generally true that ARFs have higher fees.

Anyway, I appreciate any information or source of information, especially to help me locate the lowest charges available. Thank you.


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## Trainspotter (15 Oct 2017)

Ok. In order to really find out, and perhaps get the best possible advice is to Use the services of a Registered financial adviser. These advisers are not or should not be agents for Insurance,Life companies,Or Banks administering ARF/AMRF/PRSA's etc. Believe me,I took out An ARF/AMRF product, but only on the basis of having read their written advice on retirement options.
Yes there will be charges, My fund is spread across 6 different types, Such as in equities,bonds,cash etc.The charges on these funds are set out in the information provided by the Insurance company. For the first 3 Years there was an exit charge if I cashed the policy prior to the expiration of the 3 years. I also receive a rebate of 0.5% per annum credited to the policy fund. It is worth the fee paid to a Registered Financial adviser for good proper advice on these important matters. Of course if you opt for this type of fund you have to weigh up the pro's and con's of how the Markets perform.
The can be affected by things such as Brexit, Asian Peninsula matters, Global economic activity, so be prepared to listen to any advice given by a good sound professional Financial Adviser competent in these Matters. The Financial regulator will most likely have a list of these practioners, or try the Central Bank's Website for more information. Hope This Helps!


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## Marc (15 Oct 2017)

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## Sarenco (15 Oct 2017)

Prudence said:


> I learned on this AskAboutMoney site that for the personal pension, there is an additional option of 40bps + €120, but I don't know whether that also applies to the ARF.


I'm almost certain that the same contract is available for ARFs but you would need to confirm that with a broker.  

The allocation rate and initial commission are also critical.


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## Steven Barrett (16 Oct 2017)

Sarenco said:


> I'm almost certain that the same contract is available for ARFs but you would need to confirm that with a broker.
> 
> The allocation rate and initial commission are also critical.



It is. The 0.4% AMC is only available on their passive funds, deposit fund (which differs from their cash fund) and Consensus. There's about 11 funds in total at this rate, generally enough choice to cover all bases. You can invest in their other funds too but at a higher cost. 

Steven
www.bluewaterfp.ie


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## Prudence (28 Oct 2017)

Dear Trainspotter, Marc, Sarenco and SBarrett,

Thank you very much for your responses to my query.

Prudence


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## elacsaplau (19 Apr 2018)

Hi All,

I'm trying to help a pal out with his ARF.

Do insurers accept execution only business - e.g. if he approached Friends First directly, would the product mentioned above be available?

If yes, great - if not, how much would an adviser charge as a fee to set up an ARF?


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## LDFerguson (19 Apr 2018)

My understanding is that if someone rings Friends First directly, they get told to contact a broker.  As regards how much a broker will charge, there's no set fee.  Each broker will set his/her own fees.  Shop around.


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## Sarenco (20 Apr 2018)

LDFerguson said:


> As regards how much a broker will charge, there's no set fee.  Each broker will set his/her own fees.  Shop around.


And bear in mind that you might be able to agree an allocation rate in excess of 100% for a significant premium.


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## Gordon Gekko (20 Apr 2018)

Are the Friends First investment options any good though?


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## Sarenco (20 Apr 2018)

Gordon Gekko said:


> Are the Friends First investment options any good though?


They have a good range of index funds that cover all the major asset classes -
https://www.friendsfirst.ie/create-a-cost-effective-portfolio-with-indexed-funds/


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## elacsaplau (20 Apr 2018)

It is valid to mention the investment side of the equation.

However, I have been trying to figure out the charges and would prefer focussing on these. It's quite amazing how hard it is to establish. There have been loads of attempts on AAM to get a handle on these without much success.

All I am trying to find out is:

1. What are the minimum costs out there?
2. How does one access these?

I really like LD Ferguson's contributions to AAM - invariably very solid - but on this occasion "shop around" means engaging with multiple brokers and I don't have time for this. A broker needs to eat and be paid - when I do speak to one, I just need to know that his price is reasonable.

Specific question: would a broker set up an ARF (and obligatory AMRF) for €1,000?

It seems to me like a simple job, as follows:
_Mr. Client. You have explained why you do not wish to purchase an annuity. Based on your risk profile and financial situation, it would seem that a medium risk fund would be appropriate for your ARF/AMRF. In our experience, the charges offered by XYZ company are fair and we are generally happy with their service - the have a good range of passive funds within your risk profile range._

Is there really much more to it than this?

What added value is an adviser able to offer beyond this and how much will they charge for such added value?

Ideally, I'd like a respectful but robust debate on this. My starting point is that charges remain opaque!!


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## LDFerguson (20 Apr 2018)

Hi elacsaplau, 

In this thread there have been references to both Execution-Only and Advice, which are two very different transactions for a broker.  

Execution-only is where a client comes to us and says "I want to invest €100,000 in a Friends First ARF in the Indexed World Equity Fund."  If the client is looking for any level of information, then it's not Execution-Only; it's Advice.  

What you've described in your post above is an Advice transaction.  For this, there's a number of steps that must be followed.  Initial discussion >> fact-find >> recommendation and advice >> discussion of recommendation >> execution.  

As a broker myself, I can give you quite a number of reasons why I would not want to publish a "once size fits all" fee on a website like this.  I'm not speaking for other brokers, but my own way of dealing with advice clients is to have the initial discussion first - in person, over the phone or by e-mail - and establish just what they're looking for and for me, how much work is it likely to involve.  Only then will I quote a fee, because only then do I have an idea of how much work will be involved.

Here's a random and probably incomplete list of the sort of things that will determine how much work will be involved and therefore the fee I'll quote: - 

How many pension schemes is the ARF being funded from?  It's our job to deal with the paperwork to get the monies out of the transferring schemes.  The more schemes; the more paperwork.
How much explaining am I going to have to do?  Client A might be an Askaboutmoney.com regular who knows all about the differences between an annuity and an ARF and the relative merits of each.  Client B might not have a clue and so I'll have to explain it all from first principles.  And these are complicated matters involving often large sums of money, so if I'm dealing with someone who knows little, I'll have to explain why an ARF is more suitable than an annuity or vice versa.  How charges work - allocation rates, AMCs etc.  The relationship between risk and reward in investing terms.  Establish the client's risk profile, capacity for risk etc.  Why I'm recommending Company A over Company B.  The absurdly complex rules governing withdrawals from AMRFs and ARFs.  (You can take up to 4% per year from an AMRF but you don't have to.  You don't have to take an income from an ARF.  But from the year you turn 61, you really should take a minimum income of 4% from your ARF or else suffer imputed distribution tax.  That changes in the year you hit 71.  Or if you have a big fund.  Oh and you can take any amount you want from an ARF.  Subject to tax and possibly early withdrawal penalties, but they depend on which company and product you choose.  And when you hit 75, your AMRF becomes an ARF and so ARF withdrawal rules apply.)  Tax treatment of an ARF on death.  (Who's likely to inherit - your spouse?  Your kids?  If so, will they be under 21 or over 21.  Different tax treatments for each of these scenarios.)  Don't get me wrong - I'm not trying to make out that my job is hideously complex and therefore justify extortionate fees.  But take you elacsaplau for example.  Clearly you know a lot about this, either from spending way too long on Askaboutmoney  or perhaps other reasons.  If you walked in to my office looking for an ARF, I suspect that we could fly through the whole advice process, without cutting any corners.  If Joe Bloggs walks in and only knows that he took out a pension policy because some salesman sold it to him 20 years ago and now he wants to retire, it's going to take a lot more of my time.  Bluntly, I'll charge you less than I'll charge Joe Bloggs.    
Does the client want regular reviews?  
Does the client want the freedom to contact me to ask questions about the ARF in the future?
As I say, that's just a stream of consciousness list of things that will determine what I'll charge for financial advice for an ARF or anything else really.  I'm only speaking for myself - the other brokers on here might disagree and be willing to quote a fixed fee.


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## elacsaplau (20 Apr 2018)

Excellent post Liam - now you understand why I like your style! 

I'll reply properly when time permits but your answer kind of just reinforces the problem. Every broker will want to meet you - go through various stuff - so it's actually very hard to shop around and a huge time investment. Also, because of the sensitivity and extent of personal information that one must share - it's not like buying a washing machine. So I don't accept that it's easy to shop around.

Also, the distinction between execution only and advice is accurate but silly. Accurate because it's true - silly because it's a Central Bank concept - i.e. unless you specify verbatim the product then it's advice. Please acknowledge that this is insane! It actually acts as a disservice to the informed consumer as the consumer must pay for this compliance burden.

In other words if I go to you and say I want an ARF that has low charges and that I'm very familiar with the investment markets (meaning that I capable of selecting the appropriate fund from the provider's range of funds) - you must get into detail that I personally do not require! There is no middle ground. That's silly. Like who the hell can specify the precise product when it's impossible to get comparative charging structures?!


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## Marc (20 Apr 2018)

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## elacsaplau (20 Apr 2018)

Sure you wouldn't pay to much information to anything from Milliman - its founder in Ireland is at retirement age and seems to be taking, by his own admission, heroic bets left, right and centre?*

I'll look at the report if it's publicly available. If it's like the one that the Pension's Council produced, it will be pretty useless for what I'm looking for.


*[_I am thinking_ that he will get the joke - else I'll retract!]


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## Nermal (21 Apr 2018)

Marc said:


> The average AMC for ARFs is 0.62% and responses ranged from 0.4% to 1.25%.



Daylight robbery. In the US you can park $10K in Vanguard in VTSAX at _0.04%_! We're paying an order of magnitude more. This is no place to retire!


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## Marc (21 Apr 2018)

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## elacsaplau (21 Apr 2018)

Marc said:


> So if I put a US ETF in an average Irish ARF from an APTI member I’d be paying about the same as an average US pension account.



I don't believe this conclusion - happy to be shown contrary evidence:

Specifically
- what size (€) is the average ARF in Ireland?
- what will the average APTI charge be on such an ARF
- what will be the lowest APTI charge of such an ARF


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## Gordon Gekko (21 Apr 2018)

elacsaplau said:


> I don't believe this conclusion - happy to be shown contrary evidence:
> 
> Specifically
> - what size (€) is the average ARF in Ireland?
> ...



I have seen those stats...it was a while ago though. From memory, the average ARF is small, i.e. circa €150k. I think the average ARF excluding the life companies is much larger, i.e. circa €700k.


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## Marc (22 Apr 2018)

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## elacsaplau (22 Apr 2018)

Marc said:


> How about a specific example
> 
> Leap https://www.leapplatform.ie/  (ITC and Conexim) provide an integrated QFM and custody service for a flat 0.40%pa. There is a minimum charge of €300pa.



So Leap is an advisor only platform - i.e. these funds can only be accessed via a regulated financial advisor? So how much will they charge?

What I'm trying to establish the total cost of fund management - not part of the costs!


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## Marc (22 Apr 2018)

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## Gordon Gekko (22 Apr 2018)

Hi Marc,

Who is the counterparty if I place my ARF via the LEAP platform?

Thanks,

Gordon


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## Marc (22 Apr 2018)

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## Gordon Gekko (22 Apr 2018)

Marc said:


> Counterparty is Pershing which has over $1.7 Trillion in custody assets.
> 
> Parent is BNY Mellon which is the custodian bank of Federal Reserve and has over $30 trillion in assets under custody.



Sounds promising.

So I have no ITC or Wealth Options credit risk?


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## Marc (22 Apr 2018)

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## Sarenco (22 Apr 2018)

Marc said:


> Let's say for example, that someone was influenced by some of the comments earlier on in this thread and decided to arrange an indexed fund from say Friends First.
> 
> On an ex-post basis over the last 4 years we can see the difference in realised returns between some Friends First funds and an equivalent UCITS Index Fund.
> 
> Nearly a percent a year less for the "same" index.


I find that very hard to believe.  Can you show us your workings?


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## Marc (22 Apr 2018)

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## Sarenco (22 Apr 2018)

Marc said:


> Erm, yes...
> 
> You click on the attached file and take the smaller number away from the larger one


Yes but you haven't told us what contract you are using for the Friends First fund.  What exactly are you comparing?


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## Marc (22 Apr 2018)

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## Sarenco (22 Apr 2018)

Sorry but I thought you were comparing the performance of an institutional share class of a Vanguard index fund with the performance of a Friends First fund that tracks the same index.

The Friends First contract that was referenced above has an AMC of 0.4% - not 0.65%.

Also, we have to add platform costs of 0.90% to the institutional share class TER to make an apples-to-apples comparison.


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## Marc (22 Apr 2018)

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## elacsaplau (22 Apr 2018)

In the global stock index example, are both funds tracking the same index?


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## Marc (22 Apr 2018)

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## elacsaplau (22 Apr 2018)

So what are we saying exactly? That SSGA have tracked precisely the same index as Vanguard but over the four years in question, SSGA's index tracking has cost the investor 0.35% p.a.?

These seems incredibly high. Can you provide links the two funds so that I can understand the rationale for this please? I'd be very surprised if SSGA's tracking consistently lags Vanguard - certainly to such an extent.


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## Marc (22 Apr 2018)

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## elacsaplau (22 Apr 2018)

Marc said:


> The FE analysis looks at the *State Street Index World Equity Fund *which has a declared AMC of 0.65% and the State Street Emerging Market Equity fund which has a declared AMC of 0.85%



versus



Marc said:


> Remember you aren't invested in the SSGA fund you are invested in a Friends First Mirror fund.



Well you could have made that clear a long time ago!


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## Sarenco (22 Apr 2018)

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## Steven Barrett (27 Apr 2018)

Gordon Gekko said:


> Sounds promising.
> 
> So I have no ITC or Wealth Options credit risk?



You can also use Conexim as your QFM for your ARF and ALL your funds are held by Pershing. If you set it up through the LEAP product in conjunction with ITC, you will have your own ARF bank account with Bank of Ireland. Money can be transferred to Conexim (using Pershing as the custodian) for investment. 


Steven
www.bluewaterfp.ie


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