ARF charges

What gets me is that the life companies appear to be in cohorts with the brokers and that they don't offer their best rates direct but only through an intermerdiary. Harks back to the bad old days of the Irish pension industry 20 years ago where brokers were flogging pensions with 95% allocation rates and 3% pa managment charges. Charges should be regulated by the government as it seems to be a shark infested pool once you retire. With all due respects to Marc who I find very knowledgable, to put forward the argument that €176K of charges are justified on a €390K investment over its lifetime indicates to me that the industry hasn't really changed in the past 25 years, it has just migrated from rip off pension sales to rip off ARFs and annuities. Can anyone please advise the lowest charge approach to get an index tracking ARF with low AMC without paying brokers fees north of 1% to set it up and provide unwanted annual advice and rebalancing ?
 
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Flybytheseat said:
What gets me is that the life companies appear to be in cahoots with the brokers and that they dont offer their best rates direct but only through an intermerdiary. Harks back to the bad old days of the Irish pension industry 20 years ago where brokers were flogging pensions with 95% allocation rates and 3% pa managment charges. Charges should be regulated by the government as it seems to be a shark infested pool once you retire. With all due respects to Marc who I find very knowledgable, to put forward the argument that €176K of charges are justified on a €390K investment over its lifetime indicates to me that the industry hasnt really changed in the past 25 years, it has just migrated from rip off pension sales to rip off ARFs and annuities. Can anyone please advise the lowest charge approach to get an index tracking ARF with low AMC without paying brokers fees north of 1% to set it up and provide unwanted annual advice and rebalancing ?
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You have to remember that brokers are the agents of the insurance companies (who pay them the commission) and not the agent of you the client

If you want client agreed remuneration you need a letter of engagement with your adviser and wholesale pricing

But you have VAT and other issues to deal with such as when your adviser has to update KYC or AML you are going to be charged through the nose every time a document goes out of date
 
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Flybytheseat said:
What gets me is that the life companies appear to be in cohorts with the brokers and that they don't offer their best rates direct but only through an intermerdiary. Harks back to the bad old days of the Irish pension industry 20 years ago where brokers were flogging pensions with 95% allocation rates and 3% pa managment charges. Charges should be regulated by the government as it seems to be a shark infested pool once you retire. With all due respects to Marc who I find very knowledgable, to put forward the argument that €176K of charges are justified on a €390K investment over its lifetime indicates to me that the industry hasn't really changed in the past 25 years, it has just migrated from rip off pension sales to rip off ARFs and annuities. Can anyone please advise the lowest charge approach to get an index tracking ARF with low AMC without paying brokers fees north of 1% to set it up and provide unwanted annual advice and rebalancing ?
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check out
bluewater
 
Marc said:
You have to remember that brokers are the agents of the insurance companies (who pay them the commission) and not the agent of you the client

If you want client agreed remuneration you need a letter of engagement with your adviser and wholesale pricing

But you have VAT and other issues to deal with such as when your adviser has to update KYC or AML you are going to be charged through the nose every time a document goes out of date
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Thanks Marc. Luckily I've been stung before and I am relatively finacially savvy so see through the intermediary smoke and mirrors. Shame that most of the population don't so are just sitting duck targets/marks primed to get ripped off by the majority of intermediaries.
 
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Flybytheseat said:
What gets me is that the life companies appear to be in cohorts with the brokers and that they don't offer their best rates direct but only through an intermerdiary. Harks back to the bad old days of the Irish pension industry 20 years ago where brokers were flogging pensions with 95% allocation rates and 3% pa managment charges. Charges should be regulated by the government as it seems to be a shark infested pool once you retire. With all due respects to Marc who I find very knowledgable, to put forward the argument that €176K of charges are justified on a €390K investment over its lifetime indicates to me that the industry hasn't really changed in the past 25 years, it has just migrated from rip off pension sales to rip off ARFs and annuities. Can anyone please advise the lowest charge approach to get an index tracking ARF with low AMC without paying brokers fees north of 1% to set it up and provide unwanted annual advice and rebalancing ?
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Quoting fees over the lifetime is a bit disingenuous though, no? The management fee on my pension fund is around 0.5% but I’ll probably pay €500,000 in fees over its lifetime. It’s a big number, but hopefully that’s over a long life.
 
I've spoken to several ex work colleagues recently who have all retired in the last couple of years and not one of them had the slightest idea what fees they were paying, it's a very bad reflection of the industry.
 
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Running Hatter said:
I've spoken to several ex work colleagues recently who have all retired in the last couple of years and not one of them had the slightest idea what fees they were paying, it's a very bad reflection of the industry.
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Is it not a bad reflection on your ex work colleagues?
 
KOW said:
The plain and simple is that most if not all finance gurus cannot beat the market. This is a simple fact. Investing in a cheap index/s that just track markets wins But unfortunately cuts a lot of fees from brokers. Even an independant broker wants to make money.
Looking at graphs pass performance future predictions while helpful means little.
Best allocation cheapest fees/ set up and thats it for me.
Warren Buffet stated that when he dies 90% of his monies will go into a cheap simple index fund for wife/family.
Over analysis of information that in a large part suits vested interests only muddys the water and costs money.
Decide on where you want to invest and if a broker cannot give you full fee structure in a one liner walk away.
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I see some of the confusion.

It’s not about an ARF trying to beat the market. It’s not the 1980s.

Every fund in that portfolio in post 21 is an index fund.

An ARF is always fighting against the annuity you could secure and mortality credits.

You also have sequence of returns to deal with and as I highlighted the simple fact that non of us will be able to manage this in perpetuity.
 
Marc said:
So for a pension of €450k assuming 25% lump sum is taken you would have about 375,000 left in the ARF.

Charges are actually less important than asset allocation - getting the right investment approach. That's what you are really paying an adviser for - not to be a facilitator.

For example a bank account in an ARF essentially has "no charges" but won't cut the mustard when it comes to imputed distributions of 4% and paying fees to boot.

I've used a middle of the road balanced approach but ideally you would want more in equities than this. If you can't take the investment risk you should really give consideration to an annuity for at least part of it.

So, you need to test your investment approach using some stochastic modelling like this
View attachment 7928

Then you need to compare costs on a full disclosure basis like this

View attachment 7929

Marc Westlake CFP, TEP, APFS, QFA, EFP
Chartered, Certified and European Financial Planner
Registered Trust & Estate Practitioner
Everlake
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Only catching up on this thread now. Thanks for clarifying. I see that your ARF is charged at 0.4% per year for the ARF structure + 1% up-front commission + 0.75% annual commission. So an ongoing charge of 1.15% per year.

One thing I'm unclear about - there's no ongoing annual charge for the funds themselves. I also note that you're referring to Everlake portfolios. Does your 0.75% annual commission include the cost of you acting as the fund manager where the client buys stocks directly as distinct from buying into funds or ETFs where there would be an additional annual charge for the chosen fund or ETF?
 
Running Hatter said:
I've spoken to several ex work colleagues recently who have all retired in the last couple of years and not one of them had the slightest idea what fees they were paying, it's a very bad reflection of the industry.
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To be fair, they could read this entire thread and still be none the wiser as to what they should/could be paying based on the type of service they bought. There's everything from L'Oréal to RyanAir pricing, so safe to say that competition is robust.

If only there was a website that was upfront about the level of AMC that one could expect to pay, on a execution only basis, for an average sized ARF and that also stated that for large funds lower pricing was available.

And, in the context of :
Running Hatter said:
I plan to take 25% lump sum and go with a 75% passive global equity and 25% cash mix with the remainder.
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...adding 0.01% and 0.00% in Other Ongoing Costs to the AMC quoted.

It'd be a start for those that think that they want to buy that type of service and would give them a base AMC to figure out what advice was going to cost them per annum, if that service wasn't suitable for them.



Gerard.
 
There is a misguided belief that financial adviser = trying to beat the market.

A competent financial planner provides more than just investment management.

Wealth planning in Ireland is really about tax and estate planning.

My average client will have an investment portfolio of €2m including pensions/ARFs and investment portfolios.

If you retire your pension to an ARF or vested PRSA and emigrate it’s not possible to obtain a PAYE exclusion order and you’ll be stuck for Irish income tax forever.

We will typically structure taxable accounts offshore for non-domiciled investors, or in the name of lower tax paying spouses and subject to general tax principles (income tax and CGT) rather than punitive exit tax.

Many families have a family partnership with capital invested on a look thorough basis in the names of the children, either by way of loans or gifts and with control remaining with the parents meaning that all capital gains are free from CAT.

These wealth planning services when looked at in the context of typical costs in both the USA and U.K. for equivalent services, are extremely competitive as can be seen in this recent FT article.

www.linkedin.com

Marc Westlake CFP, TEP, EFP, APFS on LinkedIn: On an equivalent basis with 150k direct investment portfolio and 350k in…

On an equivalent basis with 150k direct investment portfolio and 350k in the most expensive pension option of a PRSA our clients would pay on a fully disclosed…
www.linkedin.com www.linkedin.com

It’s horses for courses. You don’t go to a Harley Street brain surgeon for a box of aspirin
 
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Running Hatter said:
I will be retiring early (59 yrs) in the next 18 month's and plan to go down the ARF route and of course I will be getting professional advice.
I plan to take 25% lump sum and go with a 75% passive global equity and 25% cash mix with the remainder.
My question is which company has the lowest overall charges and what percentage should I expect to p
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Running Hatter said:
I will be retiring early (59 yrs) in the next 18 month's and plan to go down the ARF route and of course I will be getting professional advice.
I plan to take 25% lump sum and go with a 75% passive global equity and 25% cash mix with the remainder.
My question is which company has the lowest overall charges and what percentage should I expect to pay.
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Less than a year ago I was exactly in the same boat. You seem to know what you want. Shop around for the best deal exactly the same as you would changing your car.
When changing the car you come across sales men, sales executives. sales managers. principals etc etc.
When setting up your ARF you will come across all types with an array of letters behind their names. RUN.
Keep it simple. You are only looking for a passive global fund with cash mix at a decent cost.

When you get sorted you will scratch your head and ask yourself who benefits from all the nonsense and you will come up with the answer.
 
Marc said:
You have to remember that brokers are the agents of the insurance companies (who pay them the commission) and not the agent of you the client
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That’s a disgraceful generalisation. I suppose you’re St Francis of Assisi and work for free? There are excellent brokers out there, many of whom post here.
 
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Gordon Gekko said:
That’s a disgraceful generalisation. I suppose you’re St Francis of Assisi and work for free? There are excellent brokers out there, many of whom post here.
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Actually, it’s the legal position. Brokers have “agency agreements” with the product providers NOT the client.

Thanks for your continued interest in my posts
 
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