poorly performing isa

earlgrey_3

dunstonh wrote: »

Its a bit of a myth that trackers dont pay trail. The L&G trackers do pay IFAs trail.

Only bit of a myth?

Is it not also a fact that only trackers that charge exorbitant fees pay IFAs the full normal trail 0.5% pa commission? Those funds that charge the lowest fees pay no commission and invariably perform better.

I've asked you several times but you have never answered for some reason. Would you like to tell us how much front-end and trail commission you'd get if you sold the L&G All share tracker with only 0.5% annual management charges rather than the 1.5% upwards of some UTs (or if you pointed clients towards the very efficient ETF tracker funds which IFAs can't sell)?

The fund managers wouldn't unnecessarily pay IFAs higher rates of commision and other incentives on some products if they'd found from experience that it didn't influence the advice given. Higher commission means more business. As long as financial products are sold on commission punters won't get unbiassed advice.

What's more if an IFA usually works on commission, it's no good expecting him to give different unbiased advice if he agrees on a fee only. He can't be seen to give totally different advice depending on how he's paid. The only chance of getting unbiassed advice is to use an advisor who only works on a fee basis.

The difference between a tied agent and an IFA is similar to buying a computer at PC World rather than direct from Dell. The PC World salesman can offer a wider range of products but both will earn commision from flogging you a computer.

turbobob

earlgrey wrote: »

I've asked you several times but you have never answered for some reason. Would you like to tell us how much front-end and trail commission you'd get if you sold the L&G All share tracker with only 0.5% annual management charges rather than the 1.5% upwards of some UTs (or if you pointed clients towards the very efficient ETF tracker funds which IFAs can't sell)?

The commission details for those investments are here.

As for the OP's question I think it is a good thing they get independent advice as it sounds like they have a hybrid endowment/ISA policy (Flexible Mortgage Plan?) and not a straight ISA with separate life assurance.

molly1706

it is a flexible mortgage plan - does this make a difference?

turbobob

From my recollection of them they are more complicated than the seperate ISA and life cover route in how they are structured. I'm pretty sure that you won't be able to transfer the ISA to another provider and keep the existing life cover with L&G for example. Because the life cover (and CIC and waiver etc if chosen) is paid for by encashing units in the ISA fund. Its much like a unit linked endowment but uses an ISA fund rather than a life fund. Your IFA will be able to advise on your options though

earlgrey_3

turbobob wrote: »

The commission details for those investments are here.

Thanks TB. So they get half the management charge which is half the commission they'd get from selling managed funds. I assume that's why the best performing trackers that only charge 0.25% or 0.3% p.a. for management are pushed even less.

Did I see that Clerical Medical have said they'll stop paying annual commission unless the advisor actually does something to earn it. Very brave of them but I doubt many will follow.

dunstonh

Thanks TB. So they get half the management charge which is half the commission they'd get from selling managed funds.

No. The trail is half the commission that would be paid on most managed equity funds. Property and fixed interest funds often pay less. Typically around 0.15% to 0.35%. So a balanced portfolio would have a fair quantity of fixed interest funds in there.

Did I see that Clerical Medical have said they'll stop paying annual commission unless the advisor actually does something to earn it. Very brave of them but I doubt many will follow.

They did announce that but then they back tracked when they realised that a number of consumers were going to be worse off if they did that.