Guaranteed Investment Plan Charges

W1zz

Recently widowed mother-in-law has been to her bank (Halifax) for investment advise. She's come away with various bit of advice which I've checked through and most look okay.

One of them is a 5 year Guaranteed Investment Plan

What I'm interested to know is, that within the illustration given to her, it mentions:

For arranging this plan, Halifax Life Limited will provide Halifax plc with services and pay it an amount based on the size of your payment. This will be worth £300.00

Halifax Life Limited pays these costs out of the charges in the plan

Now to me, that reads that the guy who's given the advice and would fill the form in is being paid £300 commision for setting the plan up?

What's to stop her taking out this plan online? Would this save her £300?

many thanks,
W1zz

carnet

Usually, with most investments of this type, if you take them out directly with the provider (whether it be online or not) they will still charge the same as would have been the case if it was done via an advisor.

The only way to save money on these is to go through a Discount Broker such as Hargreaves Lansdown, Chartwell, Bestinvest, Chelsea Financial Services, UNITAS etc. etc.

Are you sure a Guaranteed Investment Plan is the best option in any case ? They tend to charge a lot for the guarantees and performance over a 5 year period will almost certainly (though, of course, not guaranteed) be bettered by a good spread of straight Unit Trusts/OEICS - especially those managed by specialist fund houses rather than banks/BS's.

It all depends on your MiL's time horizon and tolerance to risk.

Has she considered obtaining specific advice from an IFA ?

dunstonh

Recently widowed mother-in-law has been to her bank (Halifax) for investment advise.

Mistake number 1. Never go to a bank for advice.

Now to me, that reads that the guy who's given the advice and would fill the form in is being paid £300 commision for setting the plan up?

No, that is not correct. Tied advisors do not have to show the real commission that is paid. The cost of advice is shown rather than the true remuneration. With IFAs, the gross amount of the remuneration is shown.

In this case, as its a subsidiary company that is being paid, it shows the full amount that is paid to the company. Not the amount that is paid to the advisor. That will be significantly less and may be indirect. Such as salary plus bonus based on target achievement rather than on any one case.

Now to me, that reads that the guy who's given the advice and would fill the form in is being paid £300 commision for setting the plan up?

You are not authorised by the FSA and therefore cannot hold an agency arrangment to get paid such money.

What's to stop her taking out this plan online? Would this save her £300?

Assuming they even offer this product online, the terms are not improved and they keep it for themselves.

In addition to carnets alternatives listing some discount IFAs (broker is really the wrong term but is used a lot here), there will be a number locally which would be willing to do the same (some will, some will not). However, you need to be aware that the commission on this guaranteed equity bonds is quite low (when compared to other investments).

Also, if you were do it on advice basis, rather than execution only, chances are that a different product would be recommended as that is certainly not the best version around and that product type isnt exactly desirable.

W1zz

Many thanks for your help - Looks like I need to get her to see a IFA.

I had a quick look on http://www.unbiased.co.uk/ for a local IFA and depending on their qualifications it doesn't show up many for my area. S75 (Barnsley).

Was going to ask what the typical fees would be but found the info here http://www.uknetguide.co.uk/Finance/Article/Choosing_An_Independent_Financial_Advisor.html

thanks again,
W1zz

W1zz

dunstonh wrote:

Also, if you were do it on advice basis, rather than execution only, chances are that a different product would be recommended as that is certainly not the best version around and that product type isnt exactly desirable.

dunstonh, do you mean if she was to go to a IFA she should get advice only.

thanks, W1zz

dunstonh

W1zz wrote:

dunstonh, do you mean if she was to go to a IFA she should get advice only.

thanks, W1zz

No. I looked at is as a choice of going execution only or advice basis.

If execution only, go to an IFA and say "I want this product, I want this amount and I dont want any advice. How much commission will you rebate?" - doing that will result in some IFAs saying not interest, others will rebate 1 or 2% (its only 3% on GEBs).

If you were to get advice, the IFA wouldnt recommend that product as its not the best GEB. Hopefully, better alternatives would be recommended. These could be transacted through the IFA. You may not get much commission rebate on a £10,000 investment with advice but at least it would be in a better product which should give more than the commission payment indicated on the first post.

carnet

dunstonh wrote:

In addition to carnets alternatives listing some discount IFAs (broker is really the wrong term but is used a lot here), there will be a number locally which would be willing to do the same (some will, some will not).

Alternatively, if you don't need advice, plenty to choose from here - many of whom will probably give a better discount ;

http://www.find.co.uk/investments/discount_brokers_&_fund_supermarkets_page_2/

Note the website also refers to them as discount brokers .