I think Stephen is right.
All that really needs to happen is for Financial Advisers to clearly set out the charges that actually apply to a pension to the highest possible standard available rather than the minimum regulatory standard - which in the case of pensions in Ireland is virtually non existent.
We have invested heavily in being able to set out all the real costs using very clear guidance from the UK regulator, the FCA, on what a gold standard disclosure should look like. This is informed by the EU MIFID II regulations which unfortunately don't currently apply to Irish Pensions.
So for example if you are a Company Director, like me and you want to establish a small-self administered scheme, have it professionally managed and invest in a portfolio of smart-beta funds (this is my pension by the way) then you should expect to receive something like this
So, that's ex-ante cost disclosure but how do real investors do compared to all the "traditional" fund offerings? Well, we track that too
Or over 9 years here which we believe clearly demonstrates that this approach is better value than life company unit-linked offerings.
Many investors find it difficult to achieve returns offered by the markets due to a misunderstanding of investment risk, costs and taxes.
If consumers demand this level of clarity then it is down to pension companies to provide it. If they can't or won't then consumers should vote with their feet.
As we can see consumers can access an unbundled Emerging Markets equity index fund in an Irish pension on a like for like basis for a wholesale cost of
0.40 Pension trust (0.50% PRSA)
0.16% OCF
0.56% Total
Advice and investment management are costed separately unlike the case with a life company contract which pays for distribution by manipulating allocation rates and AMCs and early surrender penalties.
In fact we have only just submitted a proposal for a client with a flat fee trustee of €2000pa and reduced fee custodian of 0.1% and a flat advice fee of €2,500pa. So on their €2m pension the whole package comes in at 0.325%pa.
So for investors with more than €100,000 we are clearly able to provide a more transparent and higher value advice service and my average client has over €1m to invest. But we don’t aim to provide an execution only discount brokerage for DIY investors. We are a Chartered financial planning firm.
We generally recommend that for smaller pension funds and small regular contributions a life company is the best option and my team can do that as well but it’s not our first choice.
Naturally we don’t set out to be the cheapest in the market as we don’t see our value as simply offering the cheapest solution but what we can say is that we are consistently more transparent which we believe is more important as this debate is showing.
The distinguishing features of our Wealth Management service are our expertise, transparency and willingness to challenge the status quo for the benefit of our client
As we say, “integrity is always doing the right thing, even when no one is watching”
Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie