Execution-only brokers (what we're talking about) do nothing more then pass on a blank form Conan - they don't offer any advice.To be fair, Brokers do more than just passing on a blank form.
That's interesting. So do the life companies retrocede the additional 25bps to the discount broker on an annual basis?
It seems weird to me that anybody would get paid anything material (particulatly on an ongoing basis) for effectively just passing on a blank form.
I'm obviously in the wrong business...
Why is it weird? They are a business and are providing a service that people want. They are not a charity and are fully entitled to make an income from a good idea.
With respect Steven I think it's doing a disservice to people to use small numbers like this to make it seem like brokers are making peanuts.If someone contributes €100 a month to a PRSA, they get €3 in year one. It would take a while to make any money on such a client as insurance, levy's, Central Bank fees, website maintenance has to be paid for each of these €3 a year paying clients. They may get bigger cases too but as I said, it is a numbers game, they need volume.
If that person putting €100 a month into their pension eventually builds up a €1m pension pot over 30-40 years (I'd guess this is not uncommon), that 0.25% per annum would work out to a minimum of €30k over the lifetime of the pension. €3 sounds like peanuts, €30k is not peanuts.
In fairness Steven, you are looking at this from the broker's perspective, which is entirely understandable. But look at it from the customer's perspective.Why is it weird? They are a business and are providing a service that people want. They are not a charity and are fully entitled to make an income from a good idea.
In whichcase the 0.5% broker fee will be about €10k over a 35 year build-up and all I'm saying is that this is the figure that should be made clear to people, so they can make an informed decision - the raison d'etre for AskAboutMoney at the end of the day.The average maturity value of a pension in Ireland is (still) less that €120,000
In fairness Steven, you are looking at this from the broker's perspective, which is entirely understandable. But look at it from the customer's perspective.
The customer simply receives the insurer's pre-printed form in the post. There's no fact find. No suitability assessment. No investment advice. No follow up. There isn't even any assistance provided to complete the form. Literally all the broker does is pop a blank form in the post. That's it.
For this, they get paid 0.25% of the fund balance every year for the life of the policy.
That could end up costing the customer tens of thousands of euro.
Assume a monthly contribution of €1,000 over 35 years and a 6% annualised return. That seemingly small 0.25% trail commission will end up costing the customer €76,414!
Is that cost to the customer even remotely commensurate with the "service" provided?
Why can't a customer simply print off the form from the insurer's website? Or better still complete an on-line form?
A customer may well conclude that using an execution-only broker is better than the alternative. But that hardly means that they are receiving good value for the "service" provided.
I gave LABrokers serious consideration, 1% is still better than 1.25% if you're not interested in the advisory services. As I say I only discovered that you can go direct to some of the pension providers because somebody from AAM PM'd me to let me know about it - the fact they even felt the need to PM that instead of post it in the open forum tells you somethingTo be honest, I never really understand the model. It is ridiculous to pay 0.25% trailer fee to an execution only broker. What ongoing costs to the broker are there to justify it?
LA Brokers are very clear about their charges but I can guarantee you people that people don't do the same maths that Sarenco did above to show the true cost of the so called execution only service. And I also guarantee you that people have the same inertia about moving pensions as they do with switching bank accounts.
Please share?I gave LABrokers serious consideration, 1% is still better than 1.25% if you're not interested in the advisory services. As I say I only discovered that you can go direct to some of the pension providers because somebody from AAM PM'd me to let me know about it - the fact they even felt the need to PM that instead of post it in the open forum tells you something
But Steven this business shouldn't exist!I'm looking at it from a business owner point of view.
I’ve removed the winky face as that came across far more conspiratorial than intendedPlease share?
I asked that exact question and the answer seems to be "no" (assuming you mean an allocation net of commissions).Just to go back to that Standard Life/Vanguard contract...does that mean you can get a Buy Out Bond invested in the MCSI World Index for 0.4% per annum with 100% allocation and 5 years of exit penalties?
But Steven this business shouldn't exist!
It's gratuitously unnecessary financial intermediation that adds zero value to the customer. Zero.
And yet it will potentially cost a customer tens of thousands of euro!
Why don't insurers simply allow customers to print forms off their website? Why does the Central Bank allow this to continue?
The fact that customers avail of this "service" (through gritted teeth) is simply because they view the alternative (a full service broker) as representing even poorer value.
Fair enough Steven - and my apologies if my posts seemed unduly argumentative.I'm not going to defend another broker, especially when they have a much different business model to me. It's not how I operate.
Just to go back to that Standard Life/Vanguard contract...does that mean you can get a Buy Out Bond invested in the MCSI World Index for 0.4% per annum with 100% allocation and 5 years of exit penalties?
Is there potentially a higher allocation available (if, for example, it’s for the broker’s friend)?
Thanks.
I think you can get a Cantor execution account for 25bps. Then buy the MCSI from there. If not you can defo get access to a platform in a number of companies for 40bps.
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