Stocks and Shares ISA

chirpchirp

I have an S&S ISA with an ititial charge of 5% and a yearly management fee of 1.5%. I was discussing this with a friend who said that this meant it needed a growth of 6.5% a year or 12.5 % over 5 years. This seems very high, is my friend right?

I was hoping to pay more into it due to the low value of units at the moment but these charges are putting me off at the moment.

dunstonh

I was discussing this with a friend who said that this meant it needed a growth of 6.5% a year or 12.5 % over 5 years.

It doesnt need 6.5% a year. It needs 1.5% a year to recover the annual charge. It needs one off gains of 5% to recover the one off initial charge on each contribution.

Those charges are at the typical top end of the scale. So, you can get cheaper.

Lokolo

Your friend is correct.

Hargreaves Lansdowne take away the majority of initial fees though....

Just to clarify. If you were to keep the fund for 1 year, it would need 6.5% growth. However over 10 years the initial charge of 5% is split over it, so you would only need an average of 2% gain a year to rule out the initial and AMC.

Aegis

If you transfer your ISA to a discount broker you should be able to invest without the initial charge. Hargreaves Lansdown have an excellent execution-only service that will save the entire initial charge on most fund purchases along with a small proportion of the annual charge on many funds.

A 5% initial charge for a non-advised service is appallingly expensive.

chirpchirp

i was advised on the ISA 13 years ago and it's managed throught AXA. I don't know much about S&S so wouldn't feel ok dealing direct with anyone. Perhaps this is an area to get my head around in the future.

dunstonh

chirpchirp wrote: »

i was advised on the ISA 13 years ago and it's managed throught AXA. I don't know much about S&S so wouldn't feel ok dealing direct with anyone. Perhaps this is an area to get my head around in the future.

Your choice is really to DIY or use an IFA. An IFA should be cheaper than using AXA direct. It will not be as cheap as DIY but an IFA can reduce the costs as well as provide advice.

Aegis

chirpchirp wrote: »

i was advised on the ISA 13 years ago and it's managed throught AXA. I don't know much about S&S so wouldn't feel ok dealing direct with anyone. Perhaps this is an area to get my head around in the future.

Have you received any more advice in the last 13 years? I ask because in 1996 the investment climate was somewhat different to now. If you're still holding on to products picked out for you back then, you might well need to review your situation. Especially since you're looking to invest more and could save yourself a fair chunk just from the initial charge rebate that you can get.

Loyalty doesn't pay when it comes to product providers, as a general rule anyway.

Just so you know, Hargreaves Lansdown are a fund supermarket, so you wouldn't be going direct. For some reason collective investment products are usually more expensive rather than less if you go direct to the provider.