Fidelity fund choice and IFA commission

Baz_2

cheerfulcat wrote: »

Hi, Baz,



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



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?

I really don't understand what your point is trying to be? What's wrong with the fund? How much should he be charging? What sort of thing should I be investing in instead? I don't know what he is doing for his commision as Im not an IFA.

Won't most IFA just do the same kind of thing? Short of doing it myself what else can I do?

I think he is quite cautious with me to be honest. We did discuss some other funds, Jupiter, Black rock etc and few other but he suggested waiting until the volatility has wained a bit before doing that. Those seem to be funds of funds.

dunstonh

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?

I'm with CC on this one. An IFA has to add value to what you are doing. Otherwise what is the point of using one. Picking a single fund that controls allocations internally requires no real skill by the IFA. If that is what they recommend then there is no problem with that and for a low knowledge consumer (on investments) from a transactional IFA its probably the best option. However, is it really worth £1230 of your money.

If the IFA had built the portfolio after research and using a defined strategy (e.g. asset allocation, sector allocation, high yield or other) then you are getting something for your money as that would involve the use of knowledge, skills and software that most consumers wont have. That gives you something for your money.

I have nothing against the recommendation. If the adviser is not experienced or knowledgeable enough to build a portfolio then he shouldnt do it and should use a third party. However, charging what is typically the maximuim commission for that is on the greedy side for what will end up being a transaction with far less time spent on it and no specialist software or knowledge required.

cheerfulcat

Baz wrote: »

I really don't understand what your point is trying to be? What's wrong with the fund? How much should he be charging? What sort of thing should I be investing in instead? I don't know what he is doing for his commision as Im not an IFA..

My point is that for that level of commission a decent IFA should put together a portfolio to suit your own particular circumstances and attitude to risk. Your IFA is suggesting putting 75% into a one-size-fits-all fund. It's like going to a bespoke tailor and being offered an off-the-peg suit.

Reaper

Isn't the intention not to leave the money in this fund for long? It sounds like the idea is to move it other Fidelity funds soon and this is just a means of avoiding charges.

If so and if the IFA is going to help select which funds to move it to then it seems fair enough - provided no extra fees are going to be charged for the subsequent advice. However I think they should accept the 2% standard commission without loading another 1% fee on top.

Baz_2

cheerfulcat wrote: »

My point is that for that level of commission a decent IFA should put together a portfolio to suit your own particular circumstances and attitude to risk. Your IFA is suggesting putting 75% into a one-size-fits-all fund. It's like going to a bespoke tailor and being offered an off-the-peg suit.

I said I want 75% low risk with the other 25% more agressive.

And yes, the idea is to take advantage of the free inital charge and move elsewhere later.

Its only costing me £270, the rest comes from fidelity.

I did mention to him that I was a little uncomfortable with just one fund but he said that would be the job of a fund manager which he wasn't.

Anyway I think I have enough ammo to suggest he takes the commission on this and the other stuff without an additional fee.

Baz_2

cheerfulcat wrote: »

My point is that for that level of commission a decent IFA should put together a portfolio to suit your own particular circumstances and attitude to risk. Your IFA is suggesting putting 75% into a one-size-fits-all fund. It's like going to a bespoke tailor and being offered an off-the-peg suit.

Just further to this, I see what you are saying, in fact its that that prompted me to post however short of just spreading the money between other funds of a similar nature what else should he be advising? Surely most things are structured products of some sort or other?

Can anyone give me an example of what he should be doing to earn his money?

Surely paying into a single fund like this one that has Bonds, Gilts, equities, Cash and commodities in it is not much more different than investing in 5 separate funds with 5 different providers? Just because the 5 funds is more work doesn't really mean it would be better?

Surely the IFA cannot be expected to be better than the fund manager who is controlling the single fund? Therefore why should I be asking the IFA to do the fund managers job? And taking that to the nth degree, what exactly should the IFA be doing for me? I am really confused.

He has also suggested the fidelity cash ISA which seems to be quite poor and middle of the road and easily bettered for not much effort every April. Maybe deep down I am not happy with what he is suggesting to me but because his fees have not really been discussed and he has already spent some time getting to this stage it puts me in a bit of an akward position. I'm not really happy yet I don't really understand what he is doing wrong.

Hmmmmm

cheerfulcat

Hi, Baz,

Surely most things are structured products of some sort or other?

Not at all!

Surely paying into a single fund like this one that has Bonds, Gilts, equities, Cash and commodities in it is not much more different than investing in 5 separate funds with 5 different providers? Just because the 5 funds is more work doesn't really mean it would be better?

It's entirely different. Putting the money into one fund, even a widely diversified one, means that your IFA is leaving all of the asset allocation to that one fund manager, whose remit is set not by you but by his fund house.

What the IFA should be doing is taking careful note of your particular circumstances and attitude to risk and providing you with a tailor made portfolio - so much in fixed interest, so much in equities, so much in property and so on - to suit you. The ideal mix for you is unlikely to be the same as the ideal mix for the manager of the Fidelity fund.

Therefore why should I be asking the IFA to do the fund managers job?

You aren't. You are asking him to do an IFA's job.

Maybe deep down I am not happy with what he is suggesting to me but because his fees have not really been discussed and he has already spent some time getting to this stage it puts me in a bit of an akward position. I'm not really happy yet I don't really understand what he is doing wrong.

It's your hard-earned cash. If you aren't happy with your IFA's suggestions then tell him so, and tell him why. If he can't come up with anything better then there's nothing to stop you saying " thanks but no thanks ". FWIW it seems to me that he may well have spent some time getting to this point but not a lot of effort is evident.

jamesd

Baz wrote: »

Its only costing me £270, the rest comes from fidelity.

So, lets consider. The IFA sets the proportion of the 0.5% default commission that Fidelity pays the IFA and can set that anywhere form 0% to 0.5%. The IFA sets it to 0.5%, costing you that 0.5%, and argues that you're not paying the IFA.

That's a very delicate argument, since it's still costing you money that the IFA receives.

whiteflag_3

Baz wrote: »

Hi,


2 questions.

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

perfectly acceptable- Top quartile ranked over all time periods since launch. Lower than average charges . One that wont need constant monitoring.

This type of fund is a sensible pick by any IFA that isnt a "fund manager" ie 99% of UK IFAs. Your IFA should applauded for being upfront and telling you hes not a fund manager.

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.

Didnt he offer the otion of paying a fee? Ask what the lot would cost on a fee basis then you will be able to compare which option will suit you best.

Baz_2

whiteflag wrote: »

Didnt he offer the otion of paying a fee? Ask what the lot would cost on a fee basis then you will be able to compare which option will suit you best.

Yes I did but somehow he ended up giving me his probable advice before it was finalised. He will therefore, (which has happened to me before) just make the fee exactly the same as the commission.

I'm quite certain that I am going to tell him I'm not happy with an additional fee and that if that's what he requires then he will need to produce a more personalised portfolio. Based on the fact the 5 individual good funds in each sector should outperform one jack of all trades fund that tries to do it all.

Thanks for you comments, some of the posts on here I don't think are real world advice. These IFA's that people have putting together complex individual portfolios for people at between 1.8% commission just don't seem to exist in my world.

Makes me wonder how honest some posters actually are being.