One of my colleagues took a phone call today from a lady who just before Christmas had been advised by her financial adviser to consolidate some personal pension funds into a new plan.
Nothing unusual about that and there are sometimes some good reasons for doing this.
Lower overall management costs in the future, a better choice of investment funds that match the plan holders attitude to risk and better reporting facilities might all constitute reasons for considering such a change.
What startled us (and her) though was that the adviser had charged her a commission of 8.5% of the amount transferred to her new plan.
She had identified this from the paperwork that she received.
Of course commission has now been abolished by the Financial Services Authority, the regulator of financial advice, and without all of the facts it would be wrong of us to conclude that commission was the motive for the advice (but you know it does nag at the old brain cells that it could be a reason).
Most independent financial advisers would charge no more than 3% and some, like us, would charge an advice fee and an implementation fee if the right thing to do was to transfer the existing plans.
But even an “expensive” adviser would probably not charge more than 4%.
We believe that independent impartial advice is worth paying for but would encourage all consumers to make sure that they know exactly what they are paying and what they are getting in return. That way they can see no the price and the value of advice.
Photo credit: Flickr/superk8nyc
