Charges for Executive Pension (Zurich)

[time to plan]

When you asked the direct agent what commission he/she was going to earn from your transaction did he/she tell you how much it was, or are they refusing to disclose that?

Gerard

They said zero commission. I’m just a naturally suspicious person. But also, having been told there is 100% allocation and 0.75% AMC, I’m wondering whether commission is relevant. Is it a sepearste potential charge from those two factors?

 

[Zenith63]

When you asked the direct agent what commission he/she was going to earn from your transaction did he/she tell you how much it was, or are they refusing to disclose that?

Does that actually matter? I presume the commission comes out of the AMC, in which case whether the provider gives the agent all of it or none of it makes no difference to us punters, right?

 

[GSheehy]

Does that actually matter? I presume the commission comes out of the AMC, in which case whether the provider gives the agent all of it or none of it makes no difference to us punters, right?

I doesn't matter at all, if you're happy to deal with someone who isn't giving you all the information you need to make an informed decision.

 

[time to plan]

Does that actually matter? I presume the commission comes out of the AMC, in which case whether the provider gives the agent all of it or none of it makes no difference to us punters, right?

That’s my assumption too, but always best check your assumptions.
I’m also trying to work out the implications of the Bid / Offer price spread on a fund.

 

[Zenith63]

I doesn't matter at all, if you're happy to deal with someone who isn't giving you all the information you need to make an informed decision.

Perhaps I’m missing something, but what information am I missing? The AMC is say 0.75%, if that is split 50/50 with the agent or 100/0 makes literally no difference to me, right?

 

[time to plan]

I doesn't matter at all, if you're happy to deal with someone who isn't giving you all the information you need to make an informed decision.

From my perspective, I’m not looking for advice, just to set up a pension. But I’ll check out LA Brokers.

 

[GSheehy]

@Zenith63

You're missing this:

They said zero commission.

Do you believe that? That the tied agent is doing this for nothing?

 

[time to plan]

@Zenith63

You're missing this:



Do you believe that? That the tied agent is doing this for nothing?

I can’t say I remember the exact wording of the conversation but it was focussed on whether there were any charges that affected my fund beyond AMC and allocation. He told me he gets paid for selling. I would like to understand the impact of the Bid / Offer price gap. .

 

[Zenith63]

@Zenith63

You're missing this:



Do you believe that? That the tied agent is doing this for nothing?

I know nothing about how the people in this industry are compensated to be honest, I’d assume similar to my own that there is commission involved.

But you’re saying that my decision would be influenced by knowing what the commission paid is and I don’t see how? I can see that when dealing with an independent financial advisor that is important, because their commission structure might help you determine if there is a bias towards one pension provider over another. However when you’re dealing directly with a single pension provider, that bias cannot be there, you’ve already chosen that provider.

 

[GSheehy]

I know nothing about how the people in this industry are compensated to be honest, I’d assume similar to my own that there is commission involved.

But you’re saying that my decision would be influenced by knowing what the commission paid is and I don’t see how? I can see that when dealing with an independent financial advisor that is important, because their commission structure might help you determine if there is a bias towards one pension provider over another. However when you’re dealing directly with a single pension provider, that bias cannot be there, you’ve already chosen that provider.

Of course your decision is influenced by what the commission paid is, the charging structure you receive is a reflection of the commission structure.

That holds true for all distribution channels.

Gerard

www.prsa.ie

 

[Zenith63]

Of course your decision is influenced by what the commission paid is, the charging structure you receive is a reflection of the commission structure.

That holds true for all distribution channels.

Gerard

www.prsa.ie

With respect Gerard, you’re saying our decision should be influenced by this information, I think it is irrelevant and irrational to allow it to do so or to even concern yourself with it. Again only in the case where you are dealing directly with a pension provider, it is highly relevant when dealing with independent advisors and transparency here is critical.

Where am I wrong in this logic?

 

[Marc]

I would certainly agree with this line of reasoning.

Q: What are the real costs of this contract?
A: We are not required to tell you so we are going to pretend it is just 0.75%

OP: OK let's make all of our comparisons as if the 0.75%pa was the real charge because the salesman, who literally can't offer me an alternative and who is clearly being paid to sell me ONLY this contract, has told me that's what I'm paying.

I’ll never understand why, when you can obtain a demonstrable better quality pension (more choice and transparency) for a lower cost that anyone would continue to pursue this line of reasoning.

I wouldn't buy a TV like this let alone a pension

 

[time to plan]

Can anyone advise as to the implications of the bid / offer price gap? Thanks in advance.

 

[Marc]

It depends what you are buying

some funds are literally direct stock portfolios so the insurance company is paying stamp duty and brokerage commissions to buy a concentrated portfolio and then “unitising” this to create its own fund with a price.

so the more the fund is turned over (trying to beat the market) the more you are exposed to transaction costs inside the fund. So that’s one place spreads directly hurt your return.

since you could buy a low cost index fund to achieve the same result it is questionable why any prudent investor would ever go down the first route.

secondly you might purchase an externally managed fund.
Typically you will be buying a “mirror fund” so the insurance company is creating a unit price for its version of the underlying fund. This is clearly adding a layer of costs compared to the directly invested original fund.

I looked at this question recently and found that Fidelity funds via Irish Life had an effective total ongoing annual cost of over 3%pa and underperformed the direct investment which could have been purchased in Luxembourg as a result.

so, the only way to know what you are actually paying here is to establish your own pension trust, drop in a dealing and custody account and purchase the underlying investments directly.

you will be able to access audited report and accounts for each fund and a KIID document which discloses the real charges.

none of this is possible with a insurance company and you are trying to find an answer to a question that is deliberately being withheld.

If knowing how much you are really paying in charges is important, then a product from an insurance company that simply doesn’t have to tell you can’t be right answer.

On that basis alone most people would run a mile surely?

 

[Zenith63]

I’ll never understand why, when you can obtain a demonstrable better quality pension (more choice and transparency) for a lower cost that anyone would continue to pursue this line of reasoning.

Thanks Marc, I think this actually gets to the nub of the conversation; how can we demonstrate which pensions are actually the best options for people on AAM. I don't think the discussion of whether an agent gets 50/50 or 75/25 split from a clearly advertised AMC adds a jot to that discussion, in fact it distracts from it.

So getting back to it, does anybody have the fee structure for an SSAS they've setup so we can compare to the likes of the EPP I've outlined above?

 

[Sarenco]

In the vanguard document substitute in the column PI the following pension wrapper charge

Exec pension/buy out bond etc 0.40%pa
PRSA 0.50%pa
(Subject to a min €300pa so not suitable for smaller pensions under say €80k)

So that's a total cost to an investor of 0.70% (0.30% + 0.40%) to invest in a global equity tracker through an unbundled pension wrapper.

Is that correct? Or are there any advisory fees or commissions that aren't being mentioned?

 

[Dave Vanian]

So that's a total cost to an investor of 0.70% (0.30% + 0.40%) to invest in a global equity tracker through an unbundled pension wrapper.

Is that correct? Or are there any advisory fees or commissions that aren't being mentioned?

I've asked Marc the same question twice in this thread and so far he hasn't replied. So while he seems keen to suggest that life insurance companies aren't disclosing all their charges compared to "unbundled" pensions, we don't know the broker fee / commissions involved with the unbundled pension plans, which are an additional charge.

 

[SGWidow]

Understood Dave

Last week I asked another adviser a specific question re charges - no response.

I repeated the question in a separate thread this morning - again no response.

I genuinely believe that advisers are reluctant to answer specific questions regarding charges which is a pity.

 

[Dave Vanian]

This thread does make me think.

We have a Zurich Life tied agent claiming that they're working for zero commission.

For all other financial services products, commission disclosure has been mandatory for years. But due to a loophole in that legislation, commission disclosure is not mandatory on Executive Pensions. Is it really acceptable for a salesman to hide behind that loophole and refuse to disclose commission just because they can get away with it when selling this particular type of product? Several people on here seem to think it is.

We have a broker saying that unbundled products are better and more transparent, but not saying how much the additional broker commission / fee is, thus only disclosing some of the charges.

Is it any wonder why the public is wary of tied agents and brokers?

 

[time to plan]

This thread does make me think.

We have a Zurich Life tied agent claiming that they're working for zero commission.

For all other financial services products, commission disclosure has been mandatory for years. But due to a loophole in that legislation, commission disclosure is not mandatory on Executive Pensions. Is it really acceptable for a salesman to hide behind that loophole and refuse to disclose commission just because they can get away with it when selling this particular type of product? Several people on here seem to think it is.

We have a broker saying that unbundled products are better and more transparent, but not saying how much the additional broker commission / fee is, thus only disclosing some of the charges.

Is it any wonder why the public is wary of tied agents and brokers?

I think what I really want to know is the total cost. I put money in. Hopefully there is growth which add to the money put in. Then deducted from that sub total are costs. There are some one off costs on entry (e.g. reduction in allocation) or exit and some recurrent (e.g. AMC, trusteeship fees). I’m not sure commission comes into it as an additional cost item variable as it is really an operating cost for Zurich, accepting that it must impact on the AMC etc.

What I don’t understand is the Bid / Offer price gap. If it is 5%, is in effectively a 5% one off charge on all money put into a fund (or taken out if you prefer to look at it that way)?