"Self administered" ARF

Brendan Burgess

Brendan Burgess

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A friend of mine has gone to a fee based advisor with an ARF of around €2m. The advisor is setting them up with an Irish Life ARF with annual managment charges of around 0.75%

That is €15k a year, every year. They would be well able to manage their own money and I think that they should.

The advisor doesn't seem to have raised the possibility of a bespoke QFM.

Are there fee based QFMs? How much do they charge?

Brendan
 
Brendan,

Yes, we have seen a few of these recently. One client paid €40,000 in commission and was locked in to the contract for 5 years for his "self-directed ARF".

You shouldn't be paying more than €5000pa for an ARF contract with €2m. For very large funds we can usually negotiate a cap of around €6000pa.

Whilst I accept that many people could be able to manage an investment portfolio, when it comes to managing imputed distributions, plan charges, government tax levies, mortality drag, dealing costs, liquidity issues, rebalancing and getting institutional terms for investment then there is something to be said for getting portfolio advice.
 
Hi Brendan

With a 2M fund surely the broker is getting your friend extra allocation for the fund? Brokers are usually able to get extra allocation that will cover the AMC for a number of years (up to 7 years). However when a broker gets a client extra allocation there would encashment charges on the fund for a number of years for withdrawals over 9% p.a.

Barcuda
 
There are self directed ARFs available n the market place, as Marc mentioned you can negotiate the fees on a bespoke ARF where as you cant with an insurance company give the mechanism that insurance companies charge via unit deduction.
 
Thanks folks

What are the names of the companies which offer these funds?

Do they display their charges transparently on their websites?
 
Thanks boaber - Harvest was mentioned to me by another person. I emailed them and got this reply,


We offer flat fee structures for both our Self Administered Pension Trusts (SSAPs) and Approved Retirement Funds (ARFs).
The annual fee varies depending on a) the value of the Pension/ARF and b) the complexity of the assets contained therein.

To explain further:

We have situations where the client has chosen to leave the entire ARF is sitting in cash in bank accounts. Because this means a smaller workload for the QFM, we will agree a lower annual fee than a client who for example, has a whole range of assets such as an ARF portfolio which holds 3 direct properties, has numerous accounts with stockbrokers to hold equities and bonds, a few property syndicates with various providers, some managed funds with various fund managers and several bank accounts for cash, some perhaps denominated in foreign currencies. For clients with quite complex portfolios such as this, our annual fee would obviously be higher. We would be required to revalue all assets each year and once the client turns 60, each ARF is subject to a drawdown amount of a minimum of 5% of the fund per annum. This drawdown is subject to PAYE which we would pay across to the Revenue on behalf of the client, with the client receiving the net amount. However, because we structure our fees on a flat fee basis rather than a percentage of the Pension or ARF, our fee is very competitive compared to other providers in the market.

Because Harvest is an independent financial advisor, we have relationships with a broad range of both domestic and international banks, stockbrokers, fund managers etc. This allows our clients access the broadest range of investment options available. This also means our clients are able to access the best provider in each category with the only investment restrictions being those imposed by the Revenue for the operation of Pensions and ARFs. Having access to a broad range of providers allows clients to invest their assets across Irish and international providers to spread their risk.
 
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