Cheapest way to buy funds discussion

moneytroll

So my undestanding of IM's charges is that you pay £35 pa flat fee + the 1% for the fund management (if IC is fully rebated and AMC of 1.5% rebated to 1%).
This company could be good value for large holdings. I wonder how easy it is to use them (trading/fund switching etc) and whether you could have a SIPP with them? Anybody knows?

edit: just read DHs post, how does one know when trail is paid on a fund and when it's not?

superjames4

dunstonh wrote:

You should be aware that many funds do not pay trail commission or pay less than 0.5%.

Their commission calculator is way off the mark with real world examples...

With ISAs, you would be far better off with HL or Bestinvest if you require no servicing. If you would like servicing then switch it to a new model IFA (rather than old model).

thanks for that

I'm paying 1.5% management charges at the mo - are these likely to have 0.5% commission (as opposed to index-tracker type funds with lower annual management fees)?

Re the calculator. I think it includes the initial commission - as well as trail commission - but on amounts over £10k it still looks worthwhile (especially as one hopes those amounts will go up!).

Basically I like the tools on the Fidelity website, buying online in small amounts (£250) portfolio analysis, stock overlap - do you get these with the HL site? I guess that's what I'm paying for otherwise!

thanks again
james

ps - I don't use one, but, what are 'new model' and 'old model' IFAs?

dunstonh

I'm paying 1.5% management charges at the mo - are these likely to have 0.5% commission (as opposed to index-tracker type funds with lower annual management fees)?

Low risk funds tend to pay nothing or .15 through to .3. Such as fixed interest/gilts, corp bonds, property etc. Some medium risk/higher pay no trail at all as well but most medium risk or higher do pay 0.5

ps - I don't use one, but, what are 'new model' and 'old model' IFAs?

New model advisers take 1% initial and 0.5% trail commission (the 0.5% can be lower as mentioned above) regardless of the product wrapper used. Doesnt matter if its a bond paying 5% or an ISA paying 3%, the NM IFA only takes 1% with the rest rebating into the plan. The 0.5% pays for ongoing servicing reports, fund recommendations, wrap provision etc. Often, with larger holdings or simple re-registrations or transferring of existing business, the 1% initial is waived as NM IFAs see the 0.5% servicing commission being the driver for the business, not the initial commission.

Old models focus on up front commissions and dont service the products after that.

So NMAs are cheaper, provide ongoing servicing plus they tend to be more investment experienced as portfolio management is the bulk of what they do.

Tiggs_2

dunstonh wrote:

Old models focus on up front commissions and dont service the products after that.

They arent PAID to service ongoing, although they may still do so. I have plenty clients that dealt with me on a full up front basis that still get ongoing service. Equally, i have seen many new clients paying .5% pa to an adviser they never see.

dunstonh

They arent PAID to service ongoing, although they may still do so. I have plenty clients that dealt with me on a full up front basis that still get ongoing service. Equally, i have seen many new clients paying .5% pa to an adviser they never see.

Thats fair comment. At the end of the day its down to the individual adviser. However, the whole idea of NMA is that servicing is present.

Tiggs_2

fully agree....i only mention it as i run a small local firm that does nothing apart from IHT investemnt planning and dont often take trail on investments under £50k.....yet still give service to those clients comparable to those doing larger sums.

finacially the cost to the client is no real difference between 1% + .5% and 3-4% upfront.

i suppose my point is a NMA is pretty sure to service you, other advisers may do, sales force bankers prob wont!

dunstonh

finacially the cost to the client is no real difference between 1% + .5% and 3-4% upfront.

Not sure what rates you get but with IHT planning, you would be looking at bonds and typically they are 7% up front or 5% plus 0.5 p.a. So, NMAs taking 1% plus 0.5% gives 4% rebates.

The old model that we tend to refer to here is the saleforce "sell a product on to the next person" type approach. Generally you will find the local small firm with a handful of advisers is much more willing to provide ad hoc servicing on a range of things without charging additional fees.

How you finding IHT planning with bonds since Gordon Browns little bit of fun?

Tiggs_2

sorry...wasnt very clear. I meant that on a 7% bond taking 1% + .5 and rebating 4% is similar to taking 3-4% up front and rebating (which is what iw ould do on a smaller sum where i dont want trail)

as for Gordon Brown.....its all good. Loan Trust / Disc Gift etc was 99% of my investment work and will carry on as such, business as usual. Only difference is people are more aware of IHT because of the press so my seminars on IHT planning are packed! Done more Loan Trust since the budget than the whole first half of last year! (and there are some benifits to Loan Trusts now under disc trust taxation so in some ways its improved them)

Chrismaths

Sure, but if your client has more than the NRB these now attract lifetime rates/use up NRB don't they?

Tiggs_2

Chrismaths wrote:

Sure, but if your client has more than the NRB these now attract lifetime rates/use up NRB don't they?

the average trust i set up with a gift is between 100-300k so most are within the allowance...i also use a lot of loans into trusts and the average size there is 200-500k where ONLY the growth on the money lent is in the trust. in both these examples the 10 year charge is going to be nil or pretty low and far less than the cost of holding the asset within the esate in a normal fashion and paying IHT as normal.

in addition the will writting i do is pretty much unchanged and that can make a huge difference.

imo the press have had a kneejerk reaction to it all. IHT is not a big revenue for the govt and the changes are born outof gordon browns moral position on the subject (his views on the are documented from long before he was in any position of power).........thats why the press dont like it but find it easier to drum up a story by suggesting zillions of pounds will go from their average reader to the revenue.