Be Careful When Using Some Adviser Pension and Investment Platforms

We have already updated our instruction and explanation of pension and investment platforms.

In summary, an investment platform is a funds hypermarket for your pensions and investments.

• A ‘pensions and investment supermarket’ that you invest in via a platform in a range of hundreds, if not thousands or different funds, from many different pension/investment fund managers.  E.g., there may be 30-50 different UK stock market funds or European funds compared to just one of each fund in the plain ‘vanilla’ pension/investment.

We also warned you that investment flexibility and the much wider choice of funds on an investment platform comes at a price:

• A plain vanilla pension or investment with limited fund options will usually have lower charges as you may expect ranging from say 0.3% to 1.0% pa only plus another 0.5% to 1.0% pa adviser charge.
• A platform-based pension or investment will usually have higher charges as you may expect ranging from say 0.3% pa for the platform, 0.3% to 1.0% pa for the fund manager and another 0.5% to 1.0% pa adviser charge.
• We do not charge % based ongoing adviser fees, we charge optional fixed ongoing advice fees meaning more of your hard-earned money stays in your pension or investment for growth.

See Inv.  Platform

Pushing Own Platform

Many larger financial adviser firms and pension firms usually have their own investment platform which most clients will be recommended to invest in.  This is for a number of reasons:

Doubling or trebling up on charges to secure more revenue:

• Platform charge paid to them.
• Fund management charge paid to them.
• Adviser charge paid to them.

As mentioned above, this could amount to 2% to 2.5% pa in total charges.  It does not take long to work out much they are charging you each year compared to securing lower charges via other pension and investment sources.  The more wealth you have, the more you pay.

• We do not favour or are linked with any one platform, and we do not charge a % ongoing adviser fee.

Financial advisers that use and promote their own investment platform are clearly not that independent even when they say they are and should also use the “better than best” principle in that they should be able to demonstrate why their own platform is more suitable for a client than others on the open market.  Many rarely do.

Be Careful of Double Charges

We have seen several unscrupulous advisers and in particular, expat advisers that:

• Should not be advising on UK pensions and investments anyway when/if they are not authorised by the FCA in the UK.  They get around this by your adviser/expat adviser having a connection with a UK ‘conduit’ adviser that sets up the platform.
• Your adviser/expat adviser then gets paid a fee by the Self Invested Pension/Investment Platform provider or ‘conduit’ adviser.
• Your adviser then recommends an investment product inside your investment platform such as an offshore bond.
• Your adviser, whether UK or expat, then gets paid a fee/commission by the investment product provider such as an insurance bond provider.
• Your UK adviser would be required to disclose any adviser fee paid to them.  Overseas and expat advisers in another jurisdiction may not be required to disclose any fees or commissions to you.
• You have then paid ‘double’ initial fees:  Platform advice fee and investment product advice fee.

Be Careful with Managed Portfolio Services

Many UK advisers with their own platform place your investments in a managed portfolio services (MPS) or a discretionary fund management service (DFM).

• MPS and DFM are broadly similar in that you are invested in a portfolio that the fund manager then can move around, change investments, asset allocation etc as they see fit, without remit to you.
• These can be more expensive given they are supposed to be more actively managed.
• Your financial adviser will still be charging you an ongoing adviser fee of say 0.5% to 1.0% pa.
• At your yearly time, the adviser simply leaves you invested on the MPS or DFM as they are both actively managed by the fund manager.
• Your adviser will still get paid their ongoing adviser fee, yet they have done nothing, save coming to see you or sending a report with the fund values and performance.

Investment platforms have their place as do managed portfolio services and discretionary fund management services but be careful of being charged double for investments inside the platform or if you are paying too much for ongoing advice that you do not receive.

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