ARF & AMRF Management Fees

Simplified Information Document (SID)

Awkward moment where everyone realizes that critic needs assistance to continue argument - back to the cut and thrust

More expensive? Apples and oranges!
In 1999, Equitable launched court proceedings to enable it to force policyholders to accept bonus cuts. It won the first stage of its battle only to lose in the Court of Appeal and then the House of Lords.
Unable to pay the £1.5bn cost of losing the court case it was forced to put itself up for sale. In December 2000, having failed to find a buyer, the insurer closed to new business.
 
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Sorry Marc but that's an obvious red herring.

You suggested that the unbundled package that you offer is cheaper than a unit-linked equivalent. Your own figures show that's not the case.
 
Awkward moment where everyone realizes that critic needs assistance to continue argument - back to the cut and thrust
What's awkward?

You said the total cost to an ARF investor of investing in a unit-linked index fund was 0.64% (as against a disclosed AMC of 0.30%). Investing in the same fund through your unbundled package, per your original schedule, costs 1%.

And that's before taking account of your advisory fee.

As I said, folks can form their own judgment on the value of your services.
 
What’s awkward is you didn’t know what a SID document is.
I didn’t say our service is cheaper. I said it was more transparent.
You ignore the fact that the retail cost of a single equity fund is 0.92% vs the disclosed 0.3% amc and that in reality no one would invest a €300k ARF in a single fund. Yet you plough on with your incessant attempts to discredit a professional service.

Block
 
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No, I've never heard of a SID before. I don't find that awkward.

Are you now saying the total cost of the unit-linked index fund is not 0.64%?
 
So dear readers here you see set out the crux of the issues.

Many posters on Askaboutmoney perceive the role of a financial adviser as simply an intermediary to be instructed to arrange a contract on the keenest terms.

Many posters believe that they are perfectly capable of making their own financial decisions and don’t see why they should have to pay for a service that they don’t value.

That’s all fine and THAT is their right and where their right ends. They don’t have the right to extent their preferences to everyone else.

A professional adviser will pose a professional opinion of a matter for an investor to consider and reflect upon. One will note for example that I posed the question;”how might one deal with a loss of mental capacity” and this challenging question was deftly ignored by those hellbent on self direction.

This is because the answer doesn’t suit the argument that; “I am perfectly capable of making my own investment decisions”. I accept that maybe true today but of course, We pick up the pieces down the line when widows and widowers and families call into me to sort out the mess.

Since the advice is provided by a corporate chartered financial planning business it can neither die nor lose mental capacity.

I have never sought to operate or give the impression that I operate as a facilitator simply to be instructed to arrange the cheapest contract.

I believe that a professional adviser can add more value than simply arranging a contact. I can and daily do prove this value on an ongoing basis.

One aspect of this proof is derived from the fact that I am able to demonstrate that virtually all the investment and pension contracts on sale in Ireland today have misleading pricing so that when our hapless DIY investor instructs their broker to arrange the cheapest contract on the keenest commercial terms, more often than not, they are offered an off the shelf retail contact.

As I have illustrated in this thread, simply accepting the stated charges as the real cost of investing is invariably lulling the investor into a false sense of security.

As the original poster sets out “I have a PRB and the total fees are 0.80 %”

I’m certain that they are paying more than 0.8% but that price serves as the anchor upon which price and value are judged.

I’ve literally had people tell me that they don’t like our service because we tell them exactly what they are paying and they prefer not to know.

This is a well documented condition in the psychology literature.

Say you think you might have an illness. You fear going to the doctor in case you find out. Many people therefore put off going to the doctor which of course is irrational and could make things worse.

Recent regulation has shone a light upon some charges and it is now easier for all investors to see their charges and to make comparisons. This is true of many areas of investing except pension and post retirement ARF contracts, the subject of this thread.

As a rule of thumb one way to tell if you have opaque pricing is if you have been given “allocation rates”

An allocation rate is simply a commission option. You have an opaque contract.

It’s very often the case that when we break down the various parts of a service, as I have done in this thread, it is often possible to obtain a qualitatively better service (more transparent, more flexible, more choice, best in class etc) for approximately the same price as the retail contract.

Indeed, depending on where one is starting from it is very often possible to arrange a qualitatively better contract and save money.

For example I recently analyzed a retail investment fund compared to some of our portfolios for taxable investment accounts.

Some of my conclusions are set out

The risk adjusted returns, as measured by the Sharpe Ratio, are considerably better over both 3 and 5 years and although past performance is no guarantee of future returns, over 5 years the portfolio has outperformed the benchmark by an average of 3.49%pa gross of tax and allowing for all fund management charges (excluding advice fees, platform and dealing charges).

For an Irish resident investor, the returns net of tax could have been up to 4.96%pa higher than the investment fund which is subject to exit tax at a rate of 41% currently (depending on income tax status and if capital losses are available)

So, by my calculations an investor could have been up to 7%pa better off from this portfolio compared to a popular UCITS fund over the last 5 years.

Now I’m not going to claim that we always make people 7%pa better off but it does go to illustrate what is potentially possible.

A more reasonable number and representative of our findings is that for the same investment risk 1.5%pa is a reasonable overall value add for a typical investor.

For reference the last statement we saw had total charges paid by investor last year 3.3% our service providing the same investment outcomes cost 1.47%pa

Important to point out that these excess returns are derived from highly diversified market cap weighted equity portfolios. No attempt to try to beat the market from either stock picking or market timing.
 
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Good morning folks. Just before walking my dogs across the fields.

Fayf I think fees are over the top especially on the ongoing advise end of things.

You will need to shop around and research before choosing or using a adviser.

The likes of Marc will offer honest information you dont have to go with it or like it.


A few last comments just for a laugh.

1. Two top fund managers who predicted the last crash and manage billions in America last week gave their predictions for the S&P 500 in ten years time. One said it would be at 4000 the other 8000.


2. Charlie Munger 95. Warren Buffet born 1930 aged 89. Marc easy on the mental capacity.Most people would not go near a financial adviser if they thought they were going to loose the marbles. Marc you might have to retire at sixty:p

Look after that money its a mine field out there. ---Walkies. Thanks all.
 
I have a PRB and the total fees are 0.80 % (0.55 % to provider and 0.25 % to advisor),it comes with ongoing advice,......

Have you asked this intermediary about the transaction (from PRB to A(M)RF) and what his/her charging structure would be on the A(M)RF?
 
Hi GSheehy,

I appreciate your clear writing style and wonder if you could help me understand the following please.

Lets take a pension index fund. For simplicity, let's take a Eurozone equities index fund, designed to track Eurozone equities. And let's take 5 year performance figures to avoid potential short-term distortions.

Can you advise please:

1. What the index return/benchmark return should be (including dividends re-invested, etc.)?

2. What the actual return is from various relevant Irish index pension funds?

3. Confirmation that the difference between 1 and 2 is accounted for by tracking error and all charges.

4. How this difference compares with the disclosed management charges.

I appreciate that there may be a bit of work involved here but it would be very informative,
 
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Thanks for the comments.

Don’t think you address my salient point that

Approximately 15% of adults aged 60 and over suffer from a mental disorder. Which sort of flies in the face of your argument that the best person to manage your wealth over the whole of the rest of your life is you.

The specific point that many people will in time become unable to manage their own affairs, is of course reasonable, but most people would turn to family in that scenario. Of course there are some who cannot or do not wish to, but I think that is a narrow group on which to base your argument.
 
Fully agree with @cremeegg.

I would invest my ARF (assuming I make it that far!) in a static allocation of three or four very simple index funds that I am confident my spouse/next of kin would be able to "manage" if I go gaga.

We will also put enduring powers of attorney in place and continue to engage an accountant to look after tax filings, etc.
 
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You ignore the fact that the retail cost of a single equity fund is 0.92% vs the disclosed 0.3% amc
Well, you originally said the total cost to the investor was 0.64%, against a disclosed AMC of 0.3%.
Now I know that we pay 0.15%pa for the blue dot and I can prove that because I can obtain audited annual accounts
The difference in annualised peformance between the two versions of the fund is 0.49%pa so therefore the total cost of the fund to Irish investors is 0.64%pa

The provider is disclosing an annual management charge of 0.30%...

Insurers charge different AMCs on different ARF contracts so I don't know what you mean by "retail cost".

Regardless, even 0.92% is cheaper than your unbundled offering, before taking account of your additional 1% annual advisory fee.
 
Fully agree with @cremeegg.

I would invest my ARF (assuming I make it that far!) in a static allocation of three or four very simple index funds that I am confident my spouse/next of kin would be able to "manage" if I go gaga.

We will also put enduring powers of attorney in place and continue to engage an accountant to look after tax filings, etc.
Sarenco,
Absolutely a few index funds. Nothing fancy nothing costly and every chance of performing as well if not better then the lads/ladies looking into the crystal ball.
 
Have you asked this intermediary about the transaction (from PRB to A(M)RF) and what his/her charging structure would be on the A(M)RF?
Have you asked this intermediary about the transaction (from PRB to A(M)RF) and what his/her charging structure would be on the A(M)RF?

Not yet, as i am only starting the research, and wanted some overview from on here.

I don’t believe my previous post has been answered - why am i paying 0.80 % right now, including advice - for the PRB, and several suggestions here, that once i trigger the PRB into ARF/AMRF, it will be paying a considerably higher, up to 1.60 %.
 
I was in the US during the week and was talking to someone bout investment management fees.

I was told that the Vanguard Fund which tracks the S&P 500, has a stated management charge of 0.14% and that this charges is pretty much the difference between the fund's return and the gross (including dividends re-invested return) of the S&P 500. In addition, there would be account and fund fees - which depending on the size of the fund - would be a few additional basis points. Let's say, total fees of 0.18% and significantly these fees are available to the retail investor. This all seems to add up - see link.


Please compare and contrast these fees with the type of fees mentioned in this thread. Apart from the massive fee differential, it is noteworthy that the stated fees by Vanguard represent the actual fee impact to customers (whereas, according to Marc, the stated management fees in Ireland represent only a portion of total fees)? [Why is this and why can't the Central Bank not prescribe that the total fees are clearly disclosed?]

I would like to get to the bottom of this. Maybe, GSheehy will get a chance yo answer my earlier queries?
 
Not yet, as i am only starting the research, and wanted some overview from on here.

I don’t believe my previous post has been answered - why am i paying 0.80 % right now, including advice - for the PRB, and several suggestions here, that once i trigger the PRB into ARF/AMRF, it will be paying a considerably higher, up to 1.60 %.

You can expect to pay 1% for an ARF/ AMRF. Why 1% when you are paying 0.8% for your PRB? There is more advice in working with retirees as they have stopped working there is more work involved in the management of their retirement income. I am not talking about moving funds around but making sure they have enough money to enjoy retirement or put money away for later.

Last week, I had a annual planning meeting with a client (meeting took 1 hour, work before and after took considerably more) and the work she had to do afterwards? Book a 1st class ticket to India as spending time there was something she always wanted to do but never thought she could afford to. We showed her that she could. This client pays me to tell her to spend her money because I provide her with the certainty that it's alright to do so.



Steven
www.bluewaterfp.ie
 
is there such a thing as execution only ARF on the Irish market ? The reason for the higher charge in an ARF is that the pension holder has no choice but to take an ARF in order to get the tax free lump sum (that was used to sell the pension promise in the first place).
So providers effectively cream the pensioner when he is cornered in a catch 22.
 
That's really good, GSheehy

For PAYE folk, if they have the application form and cheque hand delivered to Zurich by Thursday - will this meet the 31st October deadline?

Thanks!
 
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