My name is Ian Burns and I’m the proprietor of Perfect Pensions, a pensions and investment advice
IFA. The business is based in Woolmer Green just outside Knebworth and has over a hundred clients in
the local area and throughout the country. I’m now able to take on new clients if you wish to review
your own situation.
I’ve used a ‘modern’ charging structure since the business was
established in 2001, namely a fee for the initial advice plus servicing commission (also known as trail
commission) for the ongoing advice. The initial fee for a new client will typically be £400 (pensions
or investment review) and £960 for an ‘options at retirement’ report. The servicing
commission will usually be 0.5% pa of funds under investment and is often a standard part of the cost
structure. For instance if you have an existing portfolio of ISAs/Unit Trusts, the standard annual management
charge is 1.5%pa. If you have bought direct, the provider will normally retain all of this. If you have
a servicing IFA, the IFA will often be paid 0.5%pa by the provider. In other words it isn’t normally
an additional charge. If you have an existing IFA, are they utilising this income to provide ongoing
advice? An alternative method of payment for ongoing advice is a monthly, annual or hourly fee. I’ve
taken over the servicing of many portfolios where the servicing commission is enough to provide ongoing
advice without the need to charge servicing fees (after the initial fee).
Frequently Asked Questions
Question
What is your hourly fee for ad hoc work? Answer
It is £80ph for standard
financial planning and £120ph for ‘options at retirement’. As far as I know, that’s
less than is typically charged. Question Does that mean you normally provide 5 hours initial advice for
standard financial planning and 8 hours for ‘options at retirement’? Answer
No, it means
I’m taking a
business decision on the long term value of a new client. The initial advice normally takes much longer
than this. Question
What is included in the initial advice? Answer
I normally ask the client to complete
an excel based fact find in their own time before meeting. I then fill in any gaps after a first meeting
and frequently request information from providers. I will normally do research via Morningstar (see below
for further details). Once the fact find is complete and I’ve agreed the overall objectives, I
will write a report and discuss it with the client. If products need to be purchased these will normally
be bought on a nil initial commission basis. The exception will be annuity purchase where I will usually
charge an additional fee or take commission from the provider. This is sometimes necessary as the initial
fee may not cover the work involved. Question
Can I ask you to take commission or fees only? Answer
Yes
you can. My ‘Client Agreement’ sets out the choices you have at outset and these include
fees only, commission only and a combination of fees and commission. The industry as a whole is still
very initial commission based and my typical business model (a modest fee + servicing commission) is
still fairly rare. I believe this charging structure offers both a fair deal and an ongoing common interest.
Question
What happens to the initial commission if you don’t take it? Answer
It is almost always
re-invested on behalf of the client. This is typically 3% of the value of the investment on lump sums,
although it can be higher. Question
How do you go about picking funds? Answer
I start with the client’s
attitude to risk, the likely timescale of the investment and then choose an appropriate portfolio. In
practice I have an ‘investment universe’ that I’ve built up over the years. These are
funds that I’ve researched and keep a watchful eye on. I have these set up as a file in my Morningstar
subscription service and this is enormously helpful. It means I get updates whenever I like, save charts
as PDF files, email the files to my clients etc. I add new funds to this ‘investment universe’ whenever
I see something that might be promising. A good example was from Autumn 2007 when I attended a Cofunds
conference and heard a talk by the manager of a new fund. I was extremely interested given my outlook
on the world economy and asked the fund manager his view on where the fund should lie in terms of risk.
This coincided with my own opinion and to date it has performed exactly as I would have expected. It
helps that I’m very interested in politics and economics, avidly read the ‘Economist’ each
week, attend public lectures at the London School of Economics etc. The background knowledge is just
as important as specific fund information. Its also important to know when to stop using funds and where
necessary transfer clients out of them. I look at factors such as volatility and how the fund manager
performs in adverse circumstances. Question
Do you specialise in any product or service? Answer
Its mainly
pensions and investments and typically the new clients are in their 50s or 60s and planning for retirement
either imminently or within a few years. I also have a number of small business proprietors and clients
who came to me with existing investment portfolio that needed ‘care and attention’. I’m
G60 qualified; that means I can advise on the more technical aspects of pensions such as ‘options
at retirement’ (drawdown and annuities). Question
How do you look after your existing clients?
Answer
This is a paragraph from my ‘Client Agreement’. ‘Services to be provided With
regards to investments which we have arranged for you, it isn’t possible to promise to keep everything
under review on an ongoing basis. However we do offer regular reviews and hope you will take advantage
of these. These reviews can be requested by the client or Perfect Pensions.’
In practice I do
my very best and most of my time is spent on portfolio reviews for existing clients. In most cases no
charge is made for this work because servicing commission has already been received from the fund providers.
If a charge was necessary the client would be informed in advance of the work proceeding. Question
How
do you choose the providers? Answer
In the great majority of cases the provider is either a fund supermarket,
pension company or life company that offers a range of funds from different fund managers. I look for
competitive charges, a good administration, financial security and an excellent range of funds. In other
words the provider is usually the ‘wrapper’ for a portfolio of externally sourced funds.
The funds themselves will tend to be from specialist fund managers such as Newton, Fidelity, Old Mutual
etc. Question
Tell me more about Perfect Pensions. Answer
Its my trading name and I’m the sole
proprietor. I have no call centres and its me that picks the phone up. I like to think that I’m
a traditional IFA who offers personal service but uses up to date technology and a modern charging structure.
Question I’ve found Perfect Pensions on the Internet and live some distance from you. Are you able
to work remotely? Answer Yes, I’ve taken a number of new clients on this way. Ideally though we
should meet and I’d encourage you to visit my office if at all possible. Question
How do I proceed
from here? Answer
You can either use the ‘Contact Us’ enquiry form or give me a call. I’ll
ask you to complete a fact find and I can email this to you. This is password protected and I can give
you your password over the phone or by post.
