1.5% Fund Charge on PRSA - Reasonable?

[kerbs]

Hi - I have recently has some fee based financial advise. One of the recommendations of the reports was that I open an employer-sponsored PRSA. They are saying that there would be no initial comission terms and that 100%c of my money would be invested. However there would be a total fund charge pa of 1.5% - of which they (the advisors) woudl receive .5%.
Is this reasonable? Maybe it is - I just dont know to be honest and wanted to check it out before I signed up.
Thanks for reading!

 

[ClubMan]

Depends on what tangible benefits the financial advisor (what kind? how independent?) claims you are getting for the 1.5% annual management fee. You can get PRSAs elsewhere that charge 0% on each contribution and only 1% annually. For example:

The cheapest PRSA?

 

[tyrekicker]

Personally, I wouldn't pay more than 1% annually. The extra 0.5% sounds like a kickback for the advisor, unless they're adding some value above and beyond...

 

[willbee]

What company is the prsa with?

 

[LDFerguson]

A PRSA set up with 100% allocation and a 1% annual management charge generally pays the intermediary little or nothing on an ongoing basis - s/he gets something upfront to set it up and that's all. So obviously you can't expect any ongoing service from the intermediary unless you are prepared to pay for it.

If the intermediary is recommending a product that charges an additional 0.5% per annum and pays commission of 0.5% per annum, you should ask what ongoing service s/he is going to be providing in return for this 0.5%.

 

[LDFerguson]

I think that If you paid a fee for the advice, you should be looking for them to recommend a product with no commissions.

I would question how independent the advice was if they are recommending you choose a product, that they will get further payment from.

I can see where you're coming from, but it's conceivable that the broker is offering additional services for the 0.5%.

 

[yob]

I'm very interested in a product thats been offered to me,but it has a 1.75% management charge,which i thought was exorbitant,but my adviser is saying its activley managed,theres no up front charges no admin' charges and no monthly transaction charges,hes come back and said he can get it for 1.5%,does this represent good value,considering theres no other charges?
from what your saying ldferguson,i'm doing ok,as my guy keeps me up to speed on whats going on,and tells me to switch,when needs be.so yes i am getting an on going service.

 

[ClubMan]

as my guy keeps me up to speed on whats going on,and tells me to switch

What exactly does he tell you that you cannot find out for yourself? Why do you/he think that he can time the market when the consensus is that nobody can predict the future?

when needs be.so yes i am getting an on going service.

The benefits attributable to paying the higher annual charge still don't look that concrete to me. I suspect that you could do just as well with a lower charges product but it obviously depends on the specific details (e.g. exactly what funds are on offer, what level of service is provided etc.).

 

[yob]

What exactly does he tell you that you cannot find out for yourself? Why do you/he think that he can time the market when the consensus is that nobody can predict the future?

your quite right clubman,not a lot.but its his job he spends alot more time studying form than i would and is in direct contact with the companies involved,who would also be watching the markets.
again i agree nobody can time the market,just like past performance is no guide to the future,but yet its what we look at to decide where were going,so its not about timing,more of an educated guess.

The benefits attributable to paying the higher annual charge still don't look that concrete to me. I suspect that you could do just as well with a lower charges product but it obviously depends on the specific details (e.g. exactly what funds are on offer, what level of service is provided etc.).

i stared buying shares directly a number of years ago for this very reason,and your quite right i've done better than most fund managers,but my shares portfolio is down.
this particular company,on a bond i purchased about 4 years ago is actually making money,while all the others are down

 

[ClubMan]

Bottom line is - if you cannot clearly identify tangible benefits attributable to paying higher charges that you can get elsewhere for a similar product then you are wasting your money and adversely impacting the long term value of your investment.