David Sammel, 61, from Yorkshire, travels around the world coaching professional tennis players, who include Liam Broady, the British No 5.
But Mr Sammel does not see himself jet-setting around the globe for ever. Eventually he hopes to semi-retire from his high-pressure job and focus instead on expanding the online coaching course he set up during lockdown.
“I want to keep working for as long as possible,” Mr Sammel said. “But in an ideal world I’ll have laid the foundations for the business so I can transition to that in the next five years. If I could at some point generate £5,000 a month income from it, that would be the icing on the cake.”
In addition to the income from his business, Mr Sammel hopes to earn £3,500 a month from his self-invested pension or Sipp and his state pension, which he will receive when he reaches 66.
To help him realise his retirement goals, he enlisted the help of an independent financial adviser. The adviser manages Mr Sammel’s £150,000 Sipp, which is invested at a relatively high level of risk, with a stronger weighting towards shares than more conservative assets.
However, his adviser recently told him that he wanted to add retirement planning advice to his services, at an extra cost of £3,500 a year. If Mr Sammel does not accept the new service, the adviser said, he will scale back the number of one-to-one meetings they have.
Mr Sammel said he had been perplexed and frustrated by this. “I do think it’s important to have an adviser to talk to about personal finance, and perhaps his retirement planning advice could be useful, but I feel like I’m paying him a lot already,” he said.
Since hiring his adviser, he has spent £8,416 in adviser charges, custody and administration fees and “discretionary fund manager” charges over the past four years.
Discretionary fund managers make more active decisions about your investments and, in theory, are meant to be more nimble in their reactions to market events. The adviser’s charge alone added up to almost £1,000 a year on average. “It’s difficult to know if the cost of his services is worth it,” he said. “A lot of people say just invest in a tracker fund instead.”
Mr Sammel said he would not be averse to managing his own investments, as he enjoys stock picking as a hobby and has £40,000 in a stocks and shares Isa, invested mainly in tech stocks.
Robin Keyte, director of Keyte Chartered Financial Planners
I suspect that Mr Sammel’s adviser may be implementing a new business model, hence the proposed new charges. Maybe he’s trying to focus on clients with larger investment pots of £700,000 or so and is therefore trying to reduce the time he spends on clients with smaller pots.
If I were in Mr Sammel’s position, I would not accept these charges. The extra £3,500 a year will eat into his returns and, with inflation going up, he needs them to beat rising costs in order to semi-retire on £3,500 a month from his pension.
To hit that target of £3,500 a month in pension income – and assuming the state pension is £8,000 a year – he needs to find £34,000 a year.
That means his pot needs to be worth £680,000 in five years, which is a long way off what he has now. Even if he could push up his returns to 8pc he could generate £220,000 in five years, but it’s unlikely he could hit returns that high. So unfortunately I would say that earning £3,500 a month in pension income is unrealistic.
It’s good that he’s recognised that he needs to take risks in order to achieve his goals by investing in an aggressive portfolio through his adviser. However, another way to increase his returns is by reducing costs.
He says his adviser charges 1pc. He should ask at least three advisers to give him quotes for what they would charge, because I’m fairly confident he could find an adviser who costs less than that. According to the Financial Conduct Authority, the City watchdog, the average ongoing fee for an adviser is 0.75pc a year.
It’s also important that he take into account the other charges associated with his adviser. The fund his adviser has invested his money in is managed by a discretionary fund manager, which adds another layer of costs. These charges are collectively eroding his returns when he needs to be maximising them. There are plenty of financial advice firms out there that will not use a discretionary fund manager.
So he faces a difficult choice. Either he decides to go it alone, which will reduce charges but also increase risk, or he decides to take a punt on a new adviser with a pricing structure that’s better suited to his goals.
Finally, he could consider reducing his outgoings in order to make his money go as far as possible.
Kusal Ariyawansa, financial planner at Appleton Gerrard Private Wealth Management
The lowest-cost option for Mr Sammel would be to self-manage his money through an investment platform.
However, I would urge him to rethink his investment strategy if he’s going to do this. Buying individual trendy stocks without a meaningful strategy can be volatile and ultimately futile – especially with only five years to go until retirement. It would be better to invest in diversified funds.
Mr Sammel has an energetic business plan and has built some assets towards it. But he currently lacks a cohesive investment strategy, backed by a sound financial plan.
I’d advise him to find a certified financial planner (search wayfinder on the Chartered Institute for Securities & Investment website, cisi.org) and pay them a one-off fee for a financial plan, which will give clarity and peace of mind. He can then choose whether to hire that planner on an ongoing basis or go it alone.
A certified financial planner will act in his interests as the financial plan will be independent of any investment management. It may be that they encourage him to rethink his retirement goals and semi-retire within 10 years instead.
A planner can also provide a business plan that will give clarity as to what his business needs to do in order to give him the lifestyle he wants, when he wants.
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