Administration Fees

Economouse

Hi,

Just trying to get a handle on fees some OAPs are being charged by Lloyds-TSB and wondered if anyone could shed some light on this? L-TSB hold an Investment Portfolio for these folks and we have been looking at the charges involved as they seem steep. Clearly laid down are Transaction Charges for buying/selling which seem reasonable. However, in addition to transaction charges, there is an annual fee of 1% of the fund value just for holding the Portfolio. Clearly, this is a significant amount of money for what seems like doing nothing. Is 1% a standard fee as much of the income derived for said OAPs actually goes towards paying this annual fee! Any feedback would be useful!

Cheers, "Economouse"

dunstonh

It sounds like the discretionary management service offered by Lloyds Private Banking rather than the more common use of unit trust funds (which are still used by LPB).

Discretionary management is an alternative to using an IFA for investment management. Typically the manager can use direct investments (which an IFA cannot). In a very basic sense, the manager works like a fund manager but without such a tight remit. Hence the annual charges. Transaction charges will exist on disposals and purchases.

LPB is expensive though and every portfolio I come across from them seems to be far too heavy in unit trusts at full retail cost and a complete bias towards Scottish Widows (which is hardly an independent approach).

An IFA or a proper discretionary investment manager would easily beat LPB on charges.

Clearly, this is a significant amount of money for what seems like doing nothing. Is 1% a standard fee as much of the income derived for said OAPs actually goes towards paying this annual fee!

1% is not heavy if the unit trusts were being purchased on nil commission (inc nil trail commission) basis as that covers the cost of advice and management. Shares an investment trusts dont generate any income to the manager so the 1% goes towards management costs. However, 1% on top of the normal commissions on a portfolio heavy in unit trusts is very expensive. For example, most IFAs will just take the natural 0.5%. LPB take the natural 0.5% and 1% on top.

Nothing wrong with the concept but the best options are nromally an investment specialist IFA or a proper discretionary investment manager.