Financial advice & PRSA charges

[Julian]

Hi,

I've moved my PRSA to a new pension scheme to bring down the fees & charges. I'm going through a financial planner which gives me access to funds at institutional rates through a fund platform, rather than going through an insurance company. The adviser is highly qualified and reviews our full financial circumstances in depth on an annual basis. We're happy we're getting a very good overall financial planning service and have someone to turn to if we need advice with anything.

Leaving aside the one-off cost charged by my adviser to set up the scheme, the pension platform fees are 0.5% and ongoing fund charges are 0.43%. On top of that the adviser charges an ongoing fee of 1% of funds under management (currently €280,000), deducted before tax from within the fund. There are no other charges and the allocation rate is 100%. Total annual fees and charges are therefore 1.93%, including ongoing financial/investment advice.

I have two questions:

1) How common (in Ireland) is it for financial planners to charge 1% p.a. of assets under management up to €1m? It would seem to be at the higher end in the Irish market but is it off the charts? I've seen other advisers charging 0.5% but I don't know if they would provide the same expertise or level of service.

2) How competitive is 0.93% p.a. for the PRSA? I'm in an equity fund. It seems to be considerably lower than many insurance company funds, which can have hidden charges bringing the real cost of investing to 3-4%?

Basically, I'm keen to get a sense of whether I'm getting a good deal overall!

 

[Oisin19]

Think about it this way. 1% of 280k is 2,800. Is the work that the advisor is doing for you worth this amount?

You say he is well qualified and provides full planning services for you? Say his hourly rate in 200 per hour that would only amount to 14 hours in total working on your plan. So I reckon if he was providing you with circa 20hrs of services this would be a good deal. Also as he is charging the pension scheme you are getting tax relief on the fees!

platform fees are generally 0.4/0.5% so this sounds ok. PRSA’s are also a little bit dearer in general.

depending what you are invested in it’s hard to know what you are getting for your 0.43. Is it something that is passively or actively managed? If it passive it probably should be cheaper than .43.

there is probably other costs not disclosed for the contract/ investment but these wouldnt bring the amount up to 3%. You could get an idea of these other costs if you ask for a KID document for the same investment via a personal investment rather than a pension structure. This however still wouldn’t have all the costs

 

[Julian]

Many thanks, that's a great way of thinking about it. Yes, he provides us with full planning services. It's hard to say how many hours he spends working on our plan each year but he spends quite a bit of time with me in annual one-on-one meetings alone and presumably spends lots more time in the preparation and follow-up. So 14 hours a year is probably conservative. Agreed on the benefit of getting tax relief on the fees!

That's reassuring about the platform fees. I'm aware that PRSAs are a bit more expensive alright.

The fund is actively managed. The KIID does mention that the ongoing charges figure excludes portfolio transaction costs. I wasn't aware that different KIIDs might disclose different costs for the same fund depending on the structure used, that's a great tip!

Thanks again for the very helpful advice.