Help with ISA and Unit Trusts

MisterNick · 9 April 2007 at 8:05AM

I have been going through investemebts recently and trying to improve them.
The latest ones are;
My wife and I's ISA into which we pay £200 per month each, and have been doing so since July 06, and
My childrens Unit trusts, into which they pay £100 per month each and have been since 12/06. The children are 12 and 14.

The investements are as follows;
MrsNick - Newton Higher Income NAV & Newton Oriental. £100 per month into each.
Value at 23/2 NHI = £935.47 (paid in £900) and NO = £748.14. (paid in (£700) 3.25% commission on each payment in. Slight variation in amounts paid in because of problem at outset.
MisterNick - Capital Int. Global Equity BD GBP NAV and Lord Abbott INV US Aff. £100 per month into each.
Value at 23/2 CIF = £822.95(paid in £800) 3.25% commission on each payment and LA = £802.11 (paid in £800) 3.25% commissionon each payment.
Children (all x 2)- Mellon Inv Funds Newton Higher Income NAV.
Value at 23/2 = £194.17 (paid in (£200) each commission 3.25% each payment.

Hope this makes sense.

I have looked at Citiwire and non of these appear at the higher end of the scales in their markets.

I suppose I am a bit worried that the IFA (although I am now not sure that he is an IFA) has a deal with Newton and is pushing their products. I am also not sure what to do next.

Can anybody help please?

cheerfulcat · 9 April 2007 at 9:16AM

That's a shocking amount of commission you're paying...

MisterNick · 9 April 2007 at 10:12AM

cheerfulcat wrote: »

That's a shocking amount of commission you're paying...

... thanks. If I were getting good advice it might help, but at the moment it is look as though I am not.

Am I right in reading these Newton funds as not being that great compared to thier peers?

carnet · 9 April 2007 at 10:21AM

Newton Higher Income is yesterday's news. It's suffered from several managerial changes in recent years and performance has been 3/4 quartile for at least the last four years.

Newton Oriental is a little better, although IMHO there are other FE ex Jap funds with more potential going forward

Lord Abbett isn't much to write home about either.

Don't know where your getting your advice from but.....

dunstonh · 9 April 2007 at 11:01AM

Are you sure thats commission and not initial charge? 3.25% would be above the typical commission newton pay so its probably the initial charge.

I can understand why newton higher income was in there if it was arranged many years ago. Not last year though.

Perhaps it isnt an IFA as you suggest but a multi-tie adviser who has Newton on their panel. Multi-ties also often get better commission so the 3.25% could be the case after all.

An IFA would almost certainly use a wrap, platform or fund supermarket (to use the various names). Which platform do you use or are they direct with provider?

MisterNick · 9 April 2007 at 11:39AM

Thanks for the replies.

The commission they take per £100 is £3.25 on my wifes and the childrens. For me it is £3.50

The adviser is Edward Jones (and yes I have read some previous posts about them)

dunsonh, I am not quite sure how I tell whether they used a wrap etc, but the monthly standing orders go directly to Edward Jones and not directly into the fund or any other TP. I have always had a bit of a problem with this as their monthly statements do not show when the units are purchased and therefore I have been suspicious that they sit on my money for a month and earn interest before purchasing the units.

There are probably enough errors in this lot for a conference, and I am happy for people to post where I have gone wrong so that others learn, but I would also appreciate some next steps to get out of this.

Many thanks

dunstonh · 9 April 2007 at 12:15PM

ahh. Edward Jones are not IFAs. They are a tied salesforce. That explains everything. They have a reputation of presenting themselves "unofficially" as IFAs. Indeed, they were in the financial press last week with that very accusation laid against some of their advisers. (research has shown that around 2/3rds of consumers seeking advice from tied agents believe that they have seen an IFA and not a tied agent).

Tied agents are the most expensive way of buying financial services products and of course, they have a very limited product range. Compare that 3.25% with a typical IFA maximum of 3% but market average (as published by the FSA based on IFA applications for the period of the last 6 months of 2006) of 1.8%.

A fund supermarket is something an IFA would use as it gives you access to around a thousand funds from all the main fund houses in one place. Allowing you to mix and match the providers on one statement.

Its not all bad news though. You can get this sorted and save money.

You can either go DIY and transfer the holdings to a fund supermarket and switch funds to a better spread at the same time or you can get an IFA to do it for you. DIY would be cheaper (it would save you around 1-1.8%). However, you would need to be confident of what you are doing.

Ongoing your charges would not be the 3.25% so you would save money there.

MisterNick · 15 April 2007 at 8:13PM

Thanks for your help here.

I spoke with the Edward Jones rep on Friday.

He was insistent that he is an IFA and not a tied agent.

He told me that he could give advice on pensions, life assurance and ISA's.

He said that he stands by the recomendations he has made. His only jsutification at the time was that the Newton funds have performed well over the 5-10 year timescale, but I have said this is not enough to convince me and I have asked him to come back to me with further justification which he is doing next week.
Bearing in mind that £350 pm out of £600 is going into Newton Higher Income I am hoping for a convincing recommendation

I hear what you say about commission and I have raised that as well.

Many thanks for your help. I will report back, but if anybody has any thought on this IFA/Tied agent aspect I would appreciate them

dunstonh · 15 April 2007 at 8:57PM

He was insistent that he is an IFA and not a tied agent.

According to their webiste, they are classed as whole of market advisers but with a preferred panel of about half a dozen providers. Guess which companies are on that list.....yes, the ones you are invested with. How convenient is that.

Also, this media article confirms they ditched IFA status in 2005:
http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=110151&d=pnd&h=pndh&f=pndf

Another article regarding IFAP and highlighting Edward Jones as an example. This happened as a number of EJ reps were trying to register on IFA promotions.
http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=110192&d=pnd&h=pndh&f=pndf

They also managed to make the financial press this week as well:
http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=140143&d=pnd&h=pndh&f=pndf

Ask him to put in writing that he is an IFA. Bet you wont get it.

He told me that he could give advice on pensions, life assurance and ISA's.

All investment class advisers can whether they are IFA, whole of market, multi-tied or tied.

MisterNick · 14 May 2007 at 8:28AM

Thanks for all your help on this.

I have the rep coming round later. He says he has the info to put my mind at rest over the Newton Higher Income, but has also suggested looking at a Standard Life fund which I do not have the name of.

I have mugged up on the Newton Fund and he knows the type of answers I am looking for. His argument about the fact that they have performed well over 5 & 10 years does not hold sway with me. I need to know about the current fund manager and her strategy and I have been reading up on this.

The one I am struggling with is the Capital International Funds. I can't find anything on the comparison websites (Citywire and trustnet) about them.
I have looked at the papers that came through originally and it says they are not regulated by the UK FSA and do not fall under the FSA Scheme. Should this be ringing alarm bells? The fund is the CIF Global Equity Fund.

I have also looked at the EJ T& Cs. They say the maximum commission they will charge for monthly payment is 3.1% on each contribution and .75% of the fund value each year. So I think I have been over paying

The other funds I have some knowledge on, which should be ok. (But if there is something anybody can help me on, it would be appreciated)

For my own peace of mind I need this meeting, but I do need to think about next steps.

Any help on the questions would be gratefully received

Many thanks

dunstonh · 14 May 2007 at 9:41AM

I have also looked at the EJ T& Cs. They say the maximum commission they will charge for monthly payment is 3.1% on each contribution and .75% of the fund value each year. So I think I have been over paying

That doesnt mean you are paying it. My key facts document shows a high figure like that as well but I take 1% and 0.5% of fund value each year. It is one of the flaws with the menu system that you show maximum and average. That doesnt mean the adviser takes maximum or average.

That said, if he it taking the maximum, then you can compare it to the current average (as published by the FSA) as 1.8% plus 0.5% p.a.

The one I am struggling with is the Capital International Funds. I can't find anything on the comparison websites (Citywire and trustnet) about them

It's an offshore fund. It shouldnt be a worry that it is not FSA authorised as most offshore investments are not. However, many offshore funds are now available within UK tax wrappers that are FSA authorised (such as ISAs and bonds). So, it depends on whether they are unwrapped or in a tax wrapper.

His argument about the fact that they have performed well over 5 & 10 years does not hold sway with me.

Good. With so many different fund managers in the last few years, any past performance figures are worthless. (Christopher Metcalf replaced the previous two back in April this year and the previous two only ran it for 18 months).

Cumulatively, the fund has been bottom quartile for 4 years and was 3rd quartile for the two before that. It is only years 9 & 10 cumulatively that had it top quartile.

Individual years have the last two as bottom quartile, then one year as top, then 3rd, 1st,2nd,1st, 2nd,1st, 1st. Lippers have it rated 5 (worst) for consistency.

Over 5 years, sector average has been 58.00% and the fund has performed at 50.03%

As I said though, past performance is useless as the current manager has only been in there weeks and plans to change the way the fund invests.

Help with ISA and Unit Trusts

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