Urgent Savings Advice Please!

Zero7_2

dunstonh wrote:

Banks and building societies generally offer more expensive products and poor performing funds when compared to the more professional fund houses.

Tied agents (your Halifax salesman) can only offer their own product range. Plus tied agents are not allowed to recommend funds outside of your risk rating and cannot recommend funds where more than one exists in that risk rating. The choice is put to you (or more commonly you are not given the choice but put in the default fund but documented that you chose it). This makes tied agents totally unsuitable to do what you are being told to do.

There are about 7000 alternatives out there and a range of those suitable to your needs and goals could be selected by any IFA (those on new model basis would be better) after they have ascertained your risk profile and situation. Alternatively you can do your own research and take a punt yourself.

With investments, no-one can pick the best fund(s) of the next 5 years. We just dont know. However, you can pick the funds from the fund houses and managers who have a far better track record than the banks and in a decent diversified portfolio, you give yourself a much better chance.

Agreed, however it is finding a good IFA that may be the problem, I need one that is not tied to any particular product. Is there a danger that they get more commission from 'certain' products which in turn makes them no different from Halifax?

dunstonh

Agreed, however it is finding a good IFA that may be the problem, I need one that is not tied to any particular product.

An IFA cannot be tied to any one product. If they were, they wouldnt be called an IFA. Provider mix is one of the things monitored by the FSA.

Is there a danger that they get more commission from 'certain' products which in turn makes them no different from Halifax?

Yes. Certain products provide more commission than others as do certain providers. However, the charges are the bit to look at not the commission. I can show many examples where the highest paying commision has lower charges than a contract with less commission but higher charges. The two things do not always go hand in hand. Also, you have to put in perspective that an IFA taking full commission is still going to offer a better contract in both terms of quality and charges than your tied agent more often than not.

The ideal IFA to look for is referred to as working on the "new model basis". This is a minority class of IFA but is growing all the time. They work on a small initial commission/fee regardless of product plus an amount to cover annual servicing. Typically, 1% initial plus 0.5% ongoing. For example, a contract on that basis with a £100,000 investment would result in around £5000 less charges on the product than a full cost IFA.

To help narrow down the options, most "new model" IFAs do not work in a salesforce (so you can cross of all the national/regional sales teams). Many seem to be longer established (probably because they can afford to move to 1% plus 0.5% due to older business). Firms with employee IFAs dont tend to offer it either (these dinosaur business models rely on high upfront commission to survive). After that narrowing down, when you phone up, you can ask the question "do you charge on the new model basis of 1% plus 0.5% trail"? If the answer is yes, then great. If not, or worse they dont know what that means despite all the industry papers covering it now, then dont use them.