What is an execution only ARF ?

[Running Hatter]

What is an execution only ARF ?
Is it the cheapest option ?
Do the insurance companies do execution only ARF'S ?
Do brokers discourage execution only ARF'S ?
Do you have to do your own tax, USC, PRSI ETC ?

 

[Kev1964]

What is an execution only ARF ?
Is it the cheapest option ?
Do the insurance companies do execution only ARF'S ?
Do brokers discourage execution only ARF'S ?
Do you have to do your own tax, USC, PRSI ETC ?

I'll be interested in whatever responses this prompts as my wife will be shopping for an ARF in the next 12 months.

I'll have a go at the last question and speculate that responsibility for tax, USC, PRSI, etc lies with the provider (ie insurance company) irrespective of sales channel and advice format.

 

[S class]

Execution only, means that the broker will not be allowed to offer any assistance regarding the type of, or risk level of the unit funds that the ARF money will be invested into. Other than that the ARF will be operated exactly the same regarding USC, PRSI and Tax. The provider (Insurance company) deals with all of these.

The broker is allowed to provide assistance with application form filling and will liaise with the provider in the setting up of the ARF. The broker will be listed as your adviser on your AVC policy and you contact them if you need to make any alterations to your ARF e.g. to change the amount of your drawdowns.

You will get a better deal on fees if you go execution only.

Basically if you are happy to choose your ARF fund type and risk level, execution only is the way to go.

A good first step is to contact the broker and ask for an information pack for your choosen provider. Read the information and decide on what fund you wish to invest into. Then fill in the application and send it to the broker.

If for instance you choose Zurich, you would have a selection of funds including Prisma funds up to risk level 6 and several other more specialised funds. You can choose to go 100% into one fund or split up into several funds.

There are plenty of threads on AAM discussing different risk level strategies for ARFs.

Some brokers specialise in execution only. Others probably discourage them as they are gaining larger fees by selling advice based ARFs.

 

[Protocol]

What is an execution only ARF ?
Is it the cheapest option ?
Do the insurance companies do execution only ARF'S ?

Nike shoes may be for sale in a shoe shop, or on Amazon. They are the same shoes. So it is the same ARF, just sold through a different channel.

Execution-only refers to the sales channel, not the underlying product.

Do brokers discourage execution only ARF'S ?

I'd say most brokers don't do them, as obviously their fee income is lower.

Some brokers, not many, specialise in them.

Do you have to do your own tax, USC, PRSI ETC ?

That is done by the pension/life co, and is nothing to do with the sales channel.

 

[Deauville]

Execution only, means that the broker will not be allowed to offer any assistance regarding the type of, or risk level of the unit funds that the ARF money will be invested into. Other than that the ARF will be operated exactly the same regarding USC, PRSI and Tax. The provider (Insurance company) deals with all of these.

The broker is allowed to provide assistance with application form filling and will liaise with the provider in the setting up of the ARF. The broker will be listed as your adviser on your AVC policy and you contact them if you need to make any alterations to your ARF e.g. to change the amount of your drawdowns.

You will get a better deal on fees if you go execution only.

Basically if you are happy to choose your ARF fund type and risk level, execution only is the way to go.

A good first step is to contact the broker and ask for an information pack for your choosen provider. Read the information and decide on what fund you wish to invest into. Then fill in the application and send it to the broker.

If for instance you choose Zurich, you would have a selection of funds including Prisma funds up to risk level 6 and several other more specialised funds. You can choose to go 100% into one fund or split up into several funds.

There are plenty of threads on AAM discussing different risk level strategies for ARFs.

Some brokers specialise in execution only. Others probably discourage them as they are gaining larger fees by selling advice based ARFs.

It’s interesting that the execution only broker becomes listed as the client’s advisor.

Would the execution only broker be compensated by the provider for the potential follow up involvement ?

What would happen if the broker ceased to operate during the active life of the ARF ?

Thanks for sharing your knowledge.

 

[Dave Vanian]

Disclosure - I am a financial broker and my firm offers both execution-only and advice services.

The rules of execution-only dictate that the client must choose what product is most suitable for them, what product provider they want and what fund(s) they want their money to be invested in. So an execution-only service is mainly aimed at people who know a lot about what they're doing.

If a broker is to provide any advice, they must first obtain a fact-find of the client's financial circumstances. This will determine what product is most suitable for the client. In this instance, the broker might be advising the client on the relative merits of an ARF, annuity or Vested PRSA. Then a broker will recommend a product provider - some pension companies offer better deals than others for larger amounts or different age groups etc. Once a product has been selected, the client's attitude to risk will need to be measured and choice of funds will need to be discussed to suit the requirement. A broker must document the recommended product and fund, showing why it is the most suitable for the client's requirement and why other products were not recommended.

As you can see, there's a lot more work involved in an advice transaction than an execution-only transaction so you can expect to pay more for advice. But if you're happy to choose your own product provider, product and fund(s) then execution-only deals can be very competitive.

 

[Dave Vanian]

Would the execution only broker be compensated by the provider for the potential follow up involvement ?

Only if the client invested more money. Otherwise, no.

What would happen if the broker ceased to operate during the active life of the ARF ?

Client can appoint a different broker or else look for administration tasks to be carried out by the provider. The provider will not provide advice and will only carry out instructions.

 

[Kev1964]

Disclosure - I am a financial broker and my firm offers both execution-only and advice services.

The rules of execution-only dictate that the client must choose what product is most suitable for them, what product provider they want and what fund(s) they want their money to be invested in. So an execution-only service is mainly aimed at people who know a lot about what they're doing.

If a broker is to provide any advice, they must first obtain a fact-find of the client's financial circumstances. This will determine what product is most suitable for the client. In this instance, the broker might be advising the client on the relative merits of an ARF, annuity or Vested PRSA. Then a broker will recommend a product provider - some pension companies offer better deals than others for larger amounts or different age groups etc. Once a product has been selected, the client's attitude to risk will need to be measured and choice of funds will need to be discussed to suit the requirement. A broker must document the recommended product and fund, showing why it is the most suitable for the client's requirement and why other products were not recommended.

As you can see, there's a lot more work involved in an advice transaction than an execution-only transaction so you can expect to pay more for advice. But if you're happy to choose your own product provider, product and fund(s) then execution-only deals can be very competitive.

That’s very helpful Dave. Is there any way you can share total broker costs for each option, perhaps using a typical or common fund size?

 

[Protocol]

That’s very helpful Dave. Is there any way you can share total broker costs for each option, perhaps using a typical or common fund size?

Here is an execution-only broker:

PRSA Ireland | PRSA.ie

Low Cost Pensions Ireland Zurich LIfe The Value Pension Website Execution Only PRSA AVC PRSA Pensions www.prsa.ie

www.prsa.ie

Charging Structure​

All Pension Products​

• 100% of your contribution is invested in your PRSA, Master Trust Executive Pension, AVC PRSA, ARF, Retirement Bond

• There are no entry or sneaky exit charges on any products

• The Annual Management Charge is 1% for PRSAs (including AVC PRSAs)

• The Annual Management Charge for a Retirement Bond or ARF is 0.75%. NB: Lower AMCs available for substantial (circa €200k+) single contribution transfers.

• The Annual Management Charge for a Single or Regular Personal Pension is 0.75% (minimum SP €10,000 or RP €500pm) . For contributions less than these it's 1%.

• Master Trust Executive / Directors Pension - Minimum Regular Contribution €750pm (Single €20,000) - Annual Management Charge is 0.75%. For contributions less than these it's 1%.

• The regulated entity is paid 0.25% by Zurich Life from the quoted annual management charges.

• There is no additional broker fee

• For some regular contribution contracts (eg. RACs & PRSAs), where the regulated entity inputs and generates the policy documents, Zurich Life will pay the intermediary for this work. This payment will be included in your disclosure documents, if it applies. This does not affect the charging structure.

The only contracts currently available on these terms through PRSA.ie are with Zurich Life Assurance plc.

This should not be interpreted as a recommendation.