IFAs - charges questions from a newbie...
Discussion
Chaps, I have never actually used an IFA, preferring to pay down mortgage, make the odd investment myself, and buy toys.
However, with savings accounts paying the square of sweet FA today, I asked a company to let me know what the options were for a hands-off, online accessible mix of investments that I simply treated like a savings account, the difference being that it is actually money going into amix of funds (I can choose the mix, change it, etc etc).
Charges for this are seemingly quite high:
3% on all payments into the fund.
2.6% annual, showing as 1% for the advisor, 0.9% for fund administrators and 0.6% to the platform itself.
Now the performance graphs over the last 5 years look good net of all of these costs, for a fund of £30,000 invested, when compared to cash in a savings account. However, I am guessing that they will look less god for a fund of £30k that wasn't all invested up front.
Also, is this high, or is this par for the course? I know nothing about buying and selling shares/investing in spread funds, and wan't a low to no-maintenance approach.
Also, they would charge me 3% to move my cash to share ISAs (I'd liketo take advanage of these - currenmtly I only have cash ISAs). I'm guessing I can just do this myself, with my bank (Barclays), for free?
However, with savings accounts paying the square of sweet FA today, I asked a company to let me know what the options were for a hands-off, online accessible mix of investments that I simply treated like a savings account, the difference being that it is actually money going into amix of funds (I can choose the mix, change it, etc etc).
Charges for this are seemingly quite high:
3% on all payments into the fund.
2.6% annual, showing as 1% for the advisor, 0.9% for fund administrators and 0.6% to the platform itself.
Now the performance graphs over the last 5 years look good net of all of these costs, for a fund of £30,000 invested, when compared to cash in a savings account. However, I am guessing that they will look less god for a fund of £30k that wasn't all invested up front.
Also, is this high, or is this par for the course? I know nothing about buying and selling shares/investing in spread funds, and wan't a low to no-maintenance approach.
Also, they would charge me 3% to move my cash to share ISAs (I'd liketo take advanage of these - currenmtly I only have cash ISAs). I'm guessing I can just do this myself, with my bank (Barclays), for free?
Best to check platform charges. There may be an exit fee. Plus commission on any asset sales as well as the spread on the sale etc.
Take a look at H&L or similar if you want a self managed platform. They do SIPP, ISA and a normal account. You can hold cash, bonds and shares or a combo of each in all of them.
Im not sure an IFA will tell you the pro's and con's of what you are planning unless they know what platform you are already in.
And even then reading the terms and conditions and fee structure etc should tell you what you want to know anyway.
Take a look at H&L or similar if you want a self managed platform. They do SIPP, ISA and a normal account. You can hold cash, bonds and shares or a combo of each in all of them.
Im not sure an IFA will tell you the pro's and con's of what you are planning unless they know what platform you are already in.
And even then reading the terms and conditions and fee structure etc should tell you what you want to know anyway.
Newc said:
On the performance chart, ask them also to plot the FTSE and S+P indices.
You can achieve the index performance yourself by buying a tracker at an annual fee of 0.1%.
Does the fund performance less fees beat the index performance less fees ?
Good question - but I only compared it to holding cash, as it's for spare cash that's just sitting in an account.You can achieve the index performance yourself by buying a tracker at an annual fee of 0.1%.
Does the fund performance less fees beat the index performance less fees ?
So a tracker ISA will simply invest in FTSE100 (or whatever) shares, and run in that way?
Harry Flashman said:
Newc said:
On the performance chart, ask them also to plot the FTSE and S+P indices.
You can achieve the index performance yourself by buying a tracker at an annual fee of 0.1%.
Does the fund performance less fees beat the index performance less fees ?
Good question - but I only compared it to holding cash, as it's for spare cash that's just sitting in an account.
You can achieve the index performance yourself by buying a tracker at an annual fee of 0.1%.
Does the fund performance less fees beat the index performance less fees ?
Good question - but I only compared it to holding cash, as it's for spare cash that's just sitting in an account.
Harry Flashman said:
So a tracker ISA will simply invest in FTSE100 (or whatever) shares, and run in that way?
Yep. All sorts of trackers available, and they are generally low annual cost plus a tenner or so trading fee to get in and out. They sit in a brokerage account or shares ISA, and the sensible ones (the main market indices) are highly liquid with very small spreads. Clearly the value of the index can go up or down and you can lose money.Harry Flashman said:
Charges for this are seemingly quite high:
3% on all payments into the fund.
2.6% annual, showing as 1% for the advisor, 0.9% for fund administrators and 0.6% to the platform itself.
Those fees look high to me.....especially the 1% annual fee for the advisor. I certainly don't pay my IFA 1% a year. I would negotiate a flat fee. 3% on all payments into the fund.
2.6% annual, showing as 1% for the advisor, 0.9% for fund administrators and 0.6% to the platform itself.
The advantage if going on a platform like Openwork is that you should get reduced fees like the 0,9% charged by "fund administrators"...that again seems very high. The platform itself I have never heard of (that means nothing) but it makes no mention of ISA's or SIPP's or the other standard financial planning products. They do seem to offer mortgages and insurance on it. To me it looks like some kind of tied platform for smallish IFA's to offer a broad range of products on rather than a specialist savings platform.
The question I would ask the IFA is how much money does that platform have in terms of Assets Under Management or Funds Under Direction. If the answer isn't £5bil plus I'd steer clear as it's not widely used. I would also ask what products you can invest in....so managed funds, ETF's, shares, bonds etc. Some platforms have a narrow list of either fund managers or say will only let you buy shares in the FTSE 250.
I use a platform called Transact which I have found to be excellent....I've not found anything I can't invest in and as some that earns a living in the financial markets I by some pretty weird and wonderful things. They certainly let you transfer things between your ISA and say you SIPP free too. I think when I looked into it they were by reputation expensive but the argument was that they offered a lot of flexibility in terms if what you can do which to me was hugely important...they charge 0.55%.
You can read a lot of negative stuff about ETF's but if you want to invest in say the FTSE 100 or the S&P they are a very efficient/cheap way of doing so.
Cheib said:
Those fees look high to me.....especially the 1% annual fee for the advisor. I certainly don't pay my IFA 1% a year. I would negotiate a flat fee.
Agreed - but do we know how much the OP is planning to invest? If it's 'only' say £10k per annum then the IFA is asking for £100 per annum, which hardly seems unreasonable for an initial consultation and ongoing overview.sidicks said:
Cheib said:
Those fees look high to me.....especially the 1% annual fee for the advisor. I certainly don't pay my IFA 1% a year. I would negotiate a flat fee.
Agreed - but do we know how much the OP is planning to invest? If it's 'only' say £10k per annum then the IFA is asking for £100 per annum, which hardly seems unreasonable for an initial consultation and ongoing overview.The platform I use doesn't charge an initial fee but does charge 0.2% for any transactions to invest that money.
Harry Flashman said:
Thanks chaps - I will do more research.
My main issue is that 3% gets taken off every payment into the platform that I make. In addition, there is a 2.6% annual fee. This (instinctively - I have no reference for these things) seems to be pretty pricey.
Your instinct is correct!My main issue is that 3% gets taken off every payment into the platform that I make. In addition, there is a 2.6% annual fee. This (instinctively - I have no reference for these things) seems to be pretty pricey.
Harry, if you have a decent idea of what you want to buy try Barclays stockbrokers, fees as little as £12.50 a trade, great research tools, pretty much all assets, ISA, SIPP, taxable portfolio, shares, collectives, ETFs.
Trackers vary hugely in cost by the way, allways underperformance the market, by the fee and any tracking error. ETFs usually cheapest way to get index replication.
Trackers vary hugely in cost by the way, allways underperformance the market, by the fee and any tracking error. ETFs usually cheapest way to get index replication.
Cheib said:
Harry Flashman said:
Thanks chaps - I will do more research.
My main issue is that 3% gets taken off every payment into the platform that I make. In addition, there is a 2.6% annual fee. This (instinctively - I have no reference for these things) seems to be pretty pricey.
Your instinct is correct!My main issue is that 3% gets taken off every payment into the platform that I make. In addition, there is a 2.6% annual fee. This (instinctively - I have no reference for these things) seems to be pretty pricey.
Check if VAT needs to be added to part of the fees and you want to know the 'Total Expense Ratio' rather than just the annual management charge. The total expense ratio is higher because it includes more expenses but it isn't fully inclusive of all charges.
3% is about the going rate, you could get it for nothing or you could be charged 5% depending on where you go.
Obviously the performance graphs will look good, they may not have shown you them if they weren't very good. Plus, hindsight is a good thing - anyone can pick and recommend investments that have done well but it doesn't necessarily mean they will continue to do well.
I'm not a financial adviser though so cannot give financial advice.
Harry Flashman said:
Thanks - I will. IFA is The Penny Group (used by colleagues), Platform he is proposing is Openwork. I'm not on anything at all at the moment.
Are you sure that the IFA is actually an IFA. It sounds like they could be an appointed representative of Openwork?An IFA in theory can choose all the products from the market whereas a tied adviser can only sell you their products.
Therefore if you're dealing with a tied adviser you are effectively paying him to sell you his product regardless of if it's the best in the market.
You will have been given a key features document (KFD) and it will show on it if they are/are not independent advisers. My understanding is that they are multi tied but I could be wrong and I am not a financial adviser, I help people get back money if they've been mis-led by a financial adviser.
Youre probably just using the term IFA losely to refer to a financial adviser as many people do.
Openwork are a multi-tied network of advisers, who originated thus:
1971 Hambro Life formed.
1985 Hambro Life becomes part of BAT Industries & Allied Dunbar formally launched.
1994 Allied Dunbar acquires Hill Samuel’s direct sales force.
1998 Zurich Financial Services buys British American Financial Services from BAT Industries, acquiring Allied Dunbar in the process. The Franchise Network launches and, two years later, recruits Abbey Life’s top 1,000 advisers.
2001 The Franchise Network becomes Zurich Advice Network.
2005 Openwork officially launches as Zurich’s exclusive multi-tied financial distribution network.
What doe the above mean, in a nutshell, financial advisers can have many hats, meaning that some can only sell 1 companies products - these are tied advisers, some can only sell products from a limited panel of companies, these are multi-tied advisers of which Openwork fall within. The next step is whole of market, which means exactly that, and these are the ones who are genuine IFA's.
When looking at charges, it really is a case of, how can this person add value to my situation, in the case above, they do seem a bit pricey. The bottom line is, can you (be bothered to) do it yourself.
1971 Hambro Life formed.
1985 Hambro Life becomes part of BAT Industries & Allied Dunbar formally launched.
1994 Allied Dunbar acquires Hill Samuel’s direct sales force.
1998 Zurich Financial Services buys British American Financial Services from BAT Industries, acquiring Allied Dunbar in the process. The Franchise Network launches and, two years later, recruits Abbey Life’s top 1,000 advisers.
2001 The Franchise Network becomes Zurich Advice Network.
2005 Openwork officially launches as Zurich’s exclusive multi-tied financial distribution network.
What doe the above mean, in a nutshell, financial advisers can have many hats, meaning that some can only sell 1 companies products - these are tied advisers, some can only sell products from a limited panel of companies, these are multi-tied advisers of which Openwork fall within. The next step is whole of market, which means exactly that, and these are the ones who are genuine IFA's.
When looking at charges, it really is a case of, how can this person add value to my situation, in the case above, they do seem a bit pricey. The bottom line is, can you (be bothered to) do it yourself.
thomson said:
Openwork are a multi-tied network of advisers, who originated thus:
1971 Hambro Life formed.
1985 Hambro Life becomes part of BAT Industries & Allied Dunbar formally launched.
1994 Allied Dunbar acquires Hill Samuel’s direct sales force.
1998 Zurich Financial Services buys British American Financial Services from BAT Industries, acquiring Allied Dunbar in the process. The Franchise Network launches and, two years later, recruits Abbey Life’s top 1,000 advisers.
2001 The Franchise Network becomes Zurich Advice Network.
2005 Openwork officially launches as Zurich’s exclusive multi-tied financial distribution network.
What doe the above mean, in a nutshell, financial advisers can have many hats, meaning that some can only sell 1 companies products - these are tied advisers, some can only sell products from a limited panel of companies, these are multi-tied advisers of which Openwork fall within. The next step is whole of market, which means exactly that, and these are the ones who are genuine IFA's.
When looking at charges, it really is a case of, how can this person add value to my situation, in the case above, they do seem a bit pricey. The bottom line is, can you (be bothered to) do it yourself.
Yes, that's right. It's when he said that the openwork adviser recommended an openwork platform that led me to question if indeed the chap had seen an IFA. As far as i'm aware the adviser should have pointed out clearly that he was not an IFA but not sure if that had been done as the original poster mentioned that he'd "seen an IFA".1971 Hambro Life formed.
1985 Hambro Life becomes part of BAT Industries & Allied Dunbar formally launched.
1994 Allied Dunbar acquires Hill Samuel’s direct sales force.
1998 Zurich Financial Services buys British American Financial Services from BAT Industries, acquiring Allied Dunbar in the process. The Franchise Network launches and, two years later, recruits Abbey Life’s top 1,000 advisers.
2001 The Franchise Network becomes Zurich Advice Network.
2005 Openwork officially launches as Zurich’s exclusive multi-tied financial distribution network.
What doe the above mean, in a nutshell, financial advisers can have many hats, meaning that some can only sell 1 companies products - these are tied advisers, some can only sell products from a limited panel of companies, these are multi-tied advisers of which Openwork fall within. The next step is whole of market, which means exactly that, and these are the ones who are genuine IFA's.
When looking at charges, it really is a case of, how can this person add value to my situation, in the case above, they do seem a bit pricey. The bottom line is, can you (be bothered to) do it yourself.
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