Should I move my pension to a platform with lower fees?
02 July 2019
Question by Michael
My £600k+ pension SIPP with Tilney and James Hay has an annual charge of about 2%. Now that I am in monthly drawdown, on my managed, cautious portfolio, I'm interested in exploring alternative providers to lessen the charges, since future returns look like being lower than they have been in the past. I've heard of firms like Netwealth whose charges can be 0.75% lower than I'm currently paying, but what other, similar firms exist which I could evaluate before deciding whether to change my advisers?
Answered by Holly Mackay
The difficulty with your question is that we're not really comparing like with like.
Your current pension portfolio with Tilney and James Hay is a traditional kind of setup, and that fee includes face-to-face ongoing advice and investment management.
There are newer so-called robo advisers which offer different levels of support and advice. Typically you'll get less face-to-face and less hand holding than you would in traditional models, but fees can be correspondingly cheaper.
A key difference of some of the newer models is that they adopt what's known as a passive form of investing. This is where your investment portfolio will track an index, and so by definition be average. It will never shoot the lights out, but nor will you be paying high fees only to see your investments languish.
The biggest decision for you is probably to think about how much you value the advice you're currently getting, and that peace of mind. It's important to look at overall returns after fees, not just the fees themselves.
Perhaps have a look at your returns after all fees over the last few years, and compare them with some of the newer providers you are looking at.
2% is a mid to high fee to pay for ongoing advice and investment management, but it's certainly not outrageously high.
I think as always the challenge is: Are you unhappy with where you are? And how good a job are they doing?
If you trust and value the relationship with your adviser, that may be worth holding onto.
However if you are keen on the idea of lowering your fees then yes, there are newer more digital brands around which will offer you a lower price point.