Pension Sharing Order - who pays this invoice

Hi, thanks so much for your reply, it all makes sense and confirms what I was thinking too.

You have given me so good advice, I'll contact the pension company about any charges from them. I have already written to the investment management company saying that they need to contact her for payment, so I'll see what response I get back from that. If they insist that I pay I will then ask them for clarification on what "professional services" means.

This has calmed me down a tad, much appreciated. I'll keep this updated with any news!...if you or anyone else has any other advice, let me know.

Is £1200 plus VAT the sort of fee we can expect an IFA to charge to advise on and do the paperwork for a pension credit transfer?

Should these advice/transfer costs be factored into pension sharing - as the inevitable costs of selling the family home are factored in?
The "worst" IFA fee I was quoted for advice and form filling was £250 per hour.
Because of those sort of costs I bought my pension direct from a pension provider via their salesperson - in a "direct sale" like mine what happens to the commission an IFA acting for me would have got? Was it still deducted by the pension provider from my pension pot somehow?

Hi Maggie

I am sure that you will get a more detailed answer from Phil (The Divorce IFA), but meanwhile I’ll throw in a few comments on costs.

Where financial advice is necessary, there will be a cost and this has to be met somehow. This is not just a matter of an IFA charging for what appears to be a simple process. Financial Advisors are obliged to know a lot about their clients before they offer any advice, they cannot just advise anyone to put an investment with firm A or firm B.

The advice profession is steadily moving to a fee based charging structure, just like lawyers, accountants and other professionals. However, there are other options still available to advisors and their clients. A commercial pension provider will offer an adviser commission in return for recommending and making the investment with them. The level of the commission can be quite significant and is typically a percentage of the amount invested.

Often, the person requiring the financial advice is not in a position to afford the full financial advice cost and may therefore be happy for the advisor to receive a commission instead of paying a sizable fee. Rarely in this world do you get something for nothing (apart from the free advice that is given on forums such as Wiki). Commission has to be paid for and effectively this is done by making a deduction from the pension investment. In other words, the true amount invested may be lower that the amount received if commission is paid.

Your lowest “price” of £250 may or may not have been a good deal, it depends on how much commission was to be taken. It could be that the advisor was offering a very efficient and cost-effective service, or it could be that they were charging the £250 and getting a nice commission as well.

You will appreciate that as the commission potential is a percentage of the investment amount, the larger the investment the higher the commission. Many IFAs offer fixed-fee services, as I know that Phil does.

Peter.

Hi,

I think Peter has covered a great deal on an issue which is receiving a lot of regulatory attention at the moment.

My own view is that any remuneration should always be agreed with the client upfront but as a commercial transaction there are always going to be different approaches.

I always work to ensure that a client knows exactly how much they are paying and what they will be receiving for that payment. This is set out in engagement letter which is signed before I proceed any further.

I break up my work in to three distinct areas - Advice, Implementation and Review and my clients choose which part/s they want. Each part is separate and each part has a cost.

Advice - this is where you are paying for pure advice and where this is being given by a highly qualified individual. Rates of £250 per hour are not unusual in divorce work. Inevitably, you will get what you pay for.

As Peter states an adviser is under a high regulatory burden to know their client before making a recommendation. In addition, pension transfers are not straightforward and the regulatory burden is even higher. Only advisers with certain qualifications (G60) are allowed by the Financial Services Authority to advise on pension transfers. Therefore, advisers may charge a risk premium as I do on their advice to cover the increased risk they are exposing to their business. For example, when advising on pension transfers, client files have to be kept indefinitely!

Implementation - this might be the implementation of the advice to transfer to a certain pension arrangement which given the complexities of organising and transferring of assets or pensions can be a time consuming affair. Ensuring that insurance companies and trustees now their responsibilities and the rules also adds to the costs here.

However, if it is reasonably straightforward such as the implementation of a pension sharing order or pension attachment order where no advice is needed on the destination pension scheme and it just need implementing - a fixed fee approach would be appropriate.

Review - where an ongoing review of their pension/assets are needed agreement needs to be reached on what level of ongoing service is required and the costs of providing this.

I have developed a fee based charging structure which caters for those who want to pay a fixed fee for each element above (which I believe is fair to both sides) whilst offering a service to those who want to pay via commission.

As Peter rightly points out there are many occasions where payment by a fee is simply not affordable or desirable. At the point of proceeding I ensure my clients know what they are paying for regardless whether it is being payable by fee or by commission.

I want to finally comment on the "going direct" with a provider / insurance company.

As Maggie has stated in her post "Because of those sort of costs I bought my pension direct from a pension provider via their salesperson - in a "direct sale" like mine what happens to the commission an IFA acting for me would have got? Was it still deducted by the pension provider from my pension pot somehow?"

I suspect that the commission would have been taken by the salesperson. Typically, the provider will sell you the same type of pension as they would have via the IFA but pocket the commission themselves.

I am passionate about what I do and I believe that taking advice is worth paying for. I ask my clients annually whether they feel they are getting value for money and I am pleased to say that I have had no complaints so far.

Regards

Phil


Please note: Although I am a Resolution Accredited Independent Financial Adviser my comments are given here as general guidance ­­­­­­­­­base­­­­­­­­­d on the (often limited) information available and does not constitute financial advice. They should not be seen as a substitute for detailed financial and legal advice.