Fidelity fund choice and IFA commission

Baz_2

Hi,

My IFA has advised that I invest in the Fidelity multi asset stategic fund as detailed here. http://www.fidelity.co.uk/adviser/landing_pages/masf_special_offer.html

The reason for this is that there are no initial charges at the moment and that it will allow me to transfer to more adventurous funds for only .25%. That means the fund can be used as a base or stepping stone while the markets and economy is still volatile and then I can transfer into more agressive or balanced funds for a low charge when things start to recover rather than paying an initial fee upfront for investing straight into one from the offset. I am aware that these funds can be opened free using a fund supermarket but I am also aware that if I want an IFA he needs paying.

The amount involved would be around £41,000 and this money needs to be protected mainly but some of if I would like to be more agressive with, i.e 75% cautious 25% agressive. £7200 will be going into the ISA version of that fund.

2 questions.

Do you have any comments regarding this fidelity fund for the 75% of the cash

And secondly what sort of fee should I be paying my IFA. He gets 2% from fidelity but has said he will need to charge a small fee too. He will also be helping me with my existing pension for very little commission but also some insurance work too which I would imagine will be commission healthy, Critical illness and income protection for both me and my wife.

Thanks in advance.

Lokolo

You should really ask how much he is charging, he should have explained the exact amounts by now. If he hasn't, ask. If he has, tell them to us.

Baz_2

Lokolo wrote: »

You should really ask how much he is charging, he should have explained the exact amounts by now. If he hasn't, ask. If he has, tell them to us.

I have asked him. He hasn't got back to me yet. Just trying to forearm myself.

Reaper

Your link doesn't work. I think you mean this one:
http://www.fidelity.co.uk/adviser/landing_pages/masf_special_offer.html

I assume you are not investing all of your money and that some is going into cash ISAs etc.

Interesting idea using a stepping stone to avoid the up front charges.

Yes if you are happy with his advice and are going to act on it then my feeling is you should do it via him.

I always suggest paying a fixed fee for their work and arranging to have the upfront commission paid to you instead as that prevents any temptation to reccomend better paying products.

The idea of paying a fee for the investment as well as commission would seem to rather defeat the point of chosing a product with reduced charges.

On the other hand asking for a fee for pension work that is likely to be a lot of work for little reward is fair enough, but if he is going to earn on other insurance products then that may offset it.

I think you will have to wait to see the total commission figures are before you can say whether anything else should be paid. My instinct says no.

dunstonh

Investments on commission basis. Typical maximum is 3% plus 0.5% natural trail. Average is 1.8% plus 0.5% natural trail. Anything less than average and you are doing well.

There may be some cross subsidising going on here with the different products. That is quite common where you agree a fee but use different products to pay for it and put others through on nil commission basis or a bit of both to match that fee.

Baz_2

Reaper wrote: »

Your link doesn't work. I think you mean this one:
http://www.fidelity.co.uk/adviser/landing_pages/masf_special_offer.html

I assume you are not investing all of your money and that some is going into cash ISAs etc.

Interesting idea using a stepping stone to avoid the up front charges.

Yes if you are happy with his advice and are going to act on it then my feeling is you should do it via him.

I always suggest paying a fixed fee for their work and arranging to have the upfront commission paid to you instead as that prevents any temptation to reccomend better paying products.

The idea of paying a fee for the investment as well as commission would seem to rather defeat the point of chosing a product with reduced charges.

On the other hand asking for a fee for pension work that is likely to be a lot of work for little reward is fair enough, but if he is going to earn on other insurance products then that may offset it.

I think you will have to wait to see the total commission figures are before you can say whether anything else should be paid. My instinct says no.

Yes it is that one. I have fixed my link.

We will have maxed our current year ISA too.

He has emailed me, rather quickly actually and said that fidelity normally pay 3% on that product but due to the special offer are paying him 2%. He will take that and ask me to pay the other 1% as a fee but will clarify it all next time we meet.

I guess that means a 1% initial fee for me with a .25% charge should I want to split into other funds within the fidelity fund supermarket.

Has anyone anything to say about the actual fund?

Reaper

Your link still doesn't work. The underlying URL is corrupt.

The fund is of a type that doesn't apeal to me personally, but it looks ok assuming you asked for something cautious.

The manager is meant to shift the money between the sectors depending on the economic cycle. The shares part (currently only 35% of the total) is pretty heavily UK based. You could balance that out by investing a smaller amount abroad.

The annual charge is 1.25% which is ok, though I'd be happier if I could see a TER (Total Expense Ratio) figure.

TEDDYRUKSPIN

I call this fund, 'INFIDELITY!' LOL. Performance. Blar.... Infidelity.

Baz_2

TEDDYRUKSPIN wrote: »

I call this fund, 'INFIDELITY!' LOL. Performance. Blar.... Infidelity.

Is that supposed to mean something?

Baz_2

Reaper wrote: »

Your link still doesn't work. The underlying URL is corrupt.

The fund is of a type that doesn't apeal to me personally, but it looks ok assuming you asked for something cautious.

The manager is meant to shift the money between the sectors depending on the economic cycle. The shares part (currently only 35% of the total) is pretty heavily UK based. You could balance that out by investing a smaller amount abroad.

The annual charge is 1.25% which is ok, though I'd be happier if I could see a TER (Total Expense Ratio) figure.

I have no idea how to fix the link as it looks fine in my edit screen. strange.

I know what you mean, its not something I would have initially thought of but the advisor said that as a starting base, with low initial fees and cautious it can be a springboard into other funds. As you can move sideways into any other fund with the fidelity fund network for only .25% fee as and when any decision is made it seems a decent place.

Thanks for you words.

My brief was something that isn't too volatile but something that would beat the returns you can get quite easily from the banks etc.

cheerfulcat

Hi, Baz,

Baz wrote: »

Do you have any comments regarding this fidelity fund for the 75% of the cash

The fund looks tempting on the surface - for the IFA, anyway! From the brochure for IFAs -

Deciding where to position your clients’portfolios in the modern investment landscape isn’t easy. An investment strategy which is ideally suited to current conditions can be less than optimal when the economic landscape shifts.

[...]determining the optimum asset exposure at any given time is a complex process that calls for specialist expertise and resources. Changes made to a client’s portfolio can turn out to be less than satisfactory with the benefit of hindsight.

Even when a change of positioning proves to be correct, there are few guarantees
that the new investment strategy will remain suitable beyond the relatively
short term. Only one thing is absolutely guaranteed: it’s a frustrating and
time-consuming process.[...]

...it is important to have a well-balanced diversified portfolio that can perform
reliably — even in the trickiest market conditions.

Fidelity Multi Asset Strategic Fund could be the solution you’ve been looking for.
Offering dynamically managed exposure to five asset classes, it’s an ‘all-terrain’
investment specifically designed to perform in all economic conditions and is
perfectly positioned to act as the cornerstone of any portfolio.

So your IFA is suggesting that you leave 75% of your portfolio allocation to a third party. All in one fund, at that. What is he doing for his ( generous ) commission?