Broker retired - what to do now....

Hi.

I am a business owner, PAYE, and have a decent amount in pensions with 2 large Life companies. About the same amount in each. My pension guy retired recently.

A couple of years back my pension guy moved pension from another Life company when I had passed the exit penalty term and he felt there were equally good options or better elsewhere. He did good deals for me - he got good allocation rates (103% I think), and didn't take a trail income, so management fee is about .9% now.

In each of the Life companies I am in two different funds, but both are very Equity based. There is an early exit penalty in one company of 18k (has performed well), and in the other it is 10k (has not performed well, but not lost).

In the short term I would like to move to lower risk options, I believe a lot of what people are saying about markets being overpriced. Can Life companies take instruction directly from me - could I ring up and ask them to move from existing fund to another specified fund?

If not, do I need to get a new pension adviser? I need to find out when the early exit penalties "expire" so that I know when I can look at moving elsewhere without a penalty. I had a broker onto me last year who was offering to do a great deal for me, but all it actually meant was moving with an allocation rate that covered the 10k early exit (103% or thereabouts), but he was going to take a .25% trail on it. That seems like money for nothing to me - he would not be providing investment advice, or managing the money or anything, yet my pension now cost an additional .25% in admin fees. Is this the norm in the industry? With my last broker, I paid him a fee any time he moved funds, apart from that he didn't take commission. I don't like the idea of locking a broker into earning fees of 1.5k p/a (and growing over time) for doing very little. I'd prefer to pay someone for their time, advice & expertise, and leave it at that.

Hi David, firstly the life companies should take instruction directly from you. Give them a ring and see what's required. Normally a written instruction should suffice. You should be able to switch funds within the life companies without incurring any early encashment penalty as long as the pensions are not invested in secure cash or with profit funds. So if you want to move to lower risk options there should not be any issue.

Trail commission is becoming the norm in the industry. 0.25% is not a lot in my opinion PROVIDED you are getting ongoing service with that ie. phonecalls as necessary and regular reviews. If a broker isn't providing that they should not be taking any trail. Simple as that. I say that as a broker myself!

Thanks for the response Gerard, I appreciate it. I had thought that they could not deal directly with anyone that was not qualified.

How does the practical side work - if you feel that your adviser was not giving you good advice, would you have to move to another Life company to stop that trail happening?

If you managed your own affairs, would the Life company be likely to give you the 1% admin fee/charge that your adviser was able to "negotiate". Would they be likely to give a non-broker 100% or better allocation as an incentive to move?

As far as I'm aware as it's your policy you should be able to make decisions on it yourself. Your best bet would be to ring the provider directly as different companies have different rules.

You could insist on the trail being removed or you could move to a different advisor or you could just cancel the policy and transfer to a different provider. Depending which suits you best and which is most convenient.

On the latter point, I'm not 100% sure. I do know that we (independent brokers) receive more favourable rates a lot of the time as companies are trying to win our business. I genuinely do not know what kind of allocations you would receive if you went to them directly. I imagine there wouldn't be a huge difference but I'm just speculating.

David_Dublin said:

If you managed your own affairs, would the Life company be likely to give you the 1% admin fee/charge that your adviser was able to "negotiate". Would they be likely to give a non-broker 100% or better allocation as an incentive to move?

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What usually happens is you get through to the direct sales guys who are tied agents and work on a commission basis for the life company.

If you don't want to pay 0.25% trailer, then don't pay it. Tell the advisor that you would prefer to pay a fee instead and come to an agreement on the fee that you will pay.



Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Good point Steven. It's important to be transparent on charges and for people to only have to pay for service they actually get. If a customer doesn't feel they are getting value for money they should move on.

David_Dublin said:

My pension guy retired recently.

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Either someone else in the practice took over his 'book' of business or he sold it. If he sold it, he's sold it to another intermediary or to the companies that administer the pensions. Either way, someone should be looking after this book of business.

In the short term I would like to move to lower risk options, I believe a lot of what people are saying about markets being overpriced. Can Life companies take instruction directly from me - could I ring up and ask them to move from existing fund to another specified fund?

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Most companies (if not all) require the written instruction of the client to do a fund switch. They won't accept the advisors instruction. So, just put it in writing to them and the job is done.

It looks like you've got a good deal, as it stands, so I wouldn't go messing with transfers or, as the industry like to call it, 'consolidation'.

Thanks for the advice GSheehy.

GSheehy said:

Either someone else in the practice took over his 'book' of business or he sold it. If he sold it, he's sold it to another intermediary or to the companies that administer the pensions. Either way, someone should be looking after this book of business.

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Re the above, it was a one man band and unusual circumstances, nothing handed onto anyone. He was a top guy, always looked after me very well.