Stocks and shares ISA transfer

kevin09061960 wrote: »

Hi the IFA wants a fee of 5%

Is that a fee or commission?

5% is high. Usually the maximum taken is 3% with the average being 1.8%. Two of the main funds supermarkets are Cofunds and Fidelity - both pay 3% commission. Selestia's initial charge is 5% but the IFA can choose to take less and rebate the rest - if your adviser is taking 5% then there is no rebating and he's taking the maximum .

There's a good thread here about Selestia - it is good but it seems your adviser wants maximum commission.

http://forums.moneysavingexpert.com/showthread.html?t=364158&highlight=selestia

and if I want a 3 monthly review that will be another 0.75%?

Do you need a 3 monthly review? What does he charge for a yearly review? Normally an IFA will take 0.5% trail commission which is paid out of the fund's normal 1.5% amc.

He tells me the charges will be slightly higher for switching to the portfolio with selestia.

From what I read of Selestia the fund charges are just the normal fund charges same as the Halifax. Although I think Selestia have an Investor Charge so perhaps this is what he is referring to.

In his summary he sugests the Halifax contract is cheaper but Selestia offers better value for money??

Selestia does give you the opportunity of using 900 funds as opposed to just a handful with the Halifax. Cofunds is the largest fund supermarket I believe.

We are both happy to put between £300 + £400 per month into the portfolio for at least the next 5-6yrs any advice please.

Why don't you speak to some more IFAs first and see what they would charge?

kevin09061960 wrote: »

Hi that is a fee for managing the fund I can have a yearly review included in the 5%.

I think you mean your IFA is taking an initial commission of 5% - 4% to himself and 1% to Selestia.

From that your IFA will do yearly rebalances taking the normal 0.5% trail commission from the amc of the funds. If you want 3 monthly you pay an extra 0.75% - can't see 3 monthly reviews being necessary for a fund of your size.

So your IFA does want more than maximum. You could do better but if you are happy then Selestia is a much better choice than the Halifax.

kevin09061960 wrote: »

I understand its a better choice with Selestia having a much larger range of funds to choose from but with the 1.5% I am paying with the Halifax in relation to the 5% with IFA am I going to be much better off unless the fund grows significantly?

You are misunderstanding the charges.

The 5% is an initial charge, not an ongoing/yearly charge. This means that the £32,000 lump sum will have a 5% initial charge taken off so £1600. Each monthly payment you make will also have a 5% initial charge so £20pm. You would have been paying the Halifax a similar initial charge each month although they probably told you that there was no charge. These charges are normal when you buy a fund.

However you can get these initial charges lower by getting advice from an adviser who takes less commission. So for example your adviser gets 4% out of that 5% as a commission payment from Selestia. If your IFA only took 1% commission then 3% would be rebated back to you meaning that your initial charge would only be 2%(1% to IFA and 1% to Selestia) on each fund purchase. Terms can sometimes be better if the IFA gets better terms but your IFA seems to be quoting the standard.

After that you have the standard annual management charge(amc) which is exactly the same (1.5%) as you were paying the Halifax. So yearly charges are the same. The only difference is the Selestia Investor Charge of £50 per year so it is slightly dearer.

Selestia is dearer than other funds supermarkets that IFAs traditionally use as their initial charge is dearer. Cofunds and Fidelity are both cheaper. However Selestia do fund switches for free and Fidelity and Cofunds charge 0.25% for each fund switch(obviously not a large amount).

sorry for my ignorance but all these facts and figures are confusing me, the IFA spent almost 2 hours with me discussing my financial situation and I felt comfortable with what he had to say its just the hefty yearly 5% charge that I am uncomfortable with.

As I said it's not a yearly 5% charge - that is only the initial charge each time you invest money with them.

Your yearly charge is 1.5% for most funds with an Investor Charge of £50.

In the end it's down to you.

The main things I would question are the 5% initial charge and the £50 Investor Charge. Maximum commission usually taken by IFAs is 3% with an average of 1.8% (although this may be for larger amounts). There would normally be no extra charge for the platform either.

Chartered Financial Planners have the highest qualifications and there are only around 1000 odd in the country. You would expect to pay more for an adviser with that standard of qualification.

Selestia commission is actually 3.5% (dropped with the Skandia merger) but IFAs are able to negotiate terms above that which have no impact on the charges to the client. For example, I have got 4.5% but an adviser down the road gets 3.5%. 4% is the most common figure though. However, that doesnt matter unless there is a comission rebate or fee being paid (as 4.5% rebate is better than a 3.5% rebate)

Halifax have an awful range of funds. Selestia has over 1000 from all the major fund houses. So, your choice is pay a bit more for quality with Selestia and use of a CFP IFA or pay less for naff funds from a tied provider using a sales rep.

halifax is not commission free. Out of that 1.5% annual management charge (which is the same with Selestia), Halifax is paid 0.5% commission. It doesnt go directly to the adviser as they are not paid commission but are paid a salary based on performance. So, dont fall for any of that no comission rubbish you get from the banks as its a play on words. Salary levels dependent on sales targets is an indirect form of commission. You being charged 1.5% and the adviser getting nothing vs you being charged 1.5% and the adviser getting 0.5% of it is the same for regardless. It woudlnt matter if the adviser got the whole 1.5%. Dont look at what the adviser gets paid. Look at what you pay and what you get for it.

Is the use of a CFP IFA really necessary here?

Its a bit overkill. Its a bit like paying a brain surgeon to diagnose your cold and give you a perscription.

Surely there is the in-between option of an investment specialist IFA charging less than 5% initial fee and who would still be able to advise on good quality funds?

Yes. Although smaller investments do have lesser scope to discount unless there is other business being involved as well which makes it cost efficient.