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Funds charges - IFA / non IFA

Here is a question for the IFAs in the house.

If I went through an IFA and he reviewed my risk profile etc and recommended funds for me how would those charges compare against me going direct to Hargreaves Lansdown and purchasing those same funds?

I know that the IFAs have to be paid, but I was wondering if the sold funds in big numbers that their fee may be offset by the discount.

Disclaimer - I know each circumstance is different but I just want to get an idea of how much extra I will be paying for the privilege of them identifying the correct funds for me.

Comments

  • Chrismaths
    Chrismaths Posts: 931 Forumite
    Depends how much commission he is taking on the deals. Have you asked him? If you know IFAs have to be paid, did you take the fee option and pay him for his recommendations, leaving you to do the arrangement? Most unit trusts have around 3% commission available to your average IFA - if he has good terms with a fund house, then he could be getting a discount on their charges. It all depends on how he is charging.

    Ask him:
    a) how much commission he is taking on each deal.
    b) if he is taking trail
    c) does he have any discounts in place with the fund companies he has recommended.
    I'm an Investment Manager. Any comments I make on this board should be not be construed as advice, and are for general information purposes only.
  • Oompa_Lumpa
    Oompa_Lumpa Posts: 111 Forumite
    I don't have an adviser. I am just trying to work out the pros and cons of investing with one and without one.
    I am aware of the pros of investing using an adviser, and I reckoned the cons would be fees, so wanted to get an idea of the size of them.
  • dunstonh
    dunstonh Posts: 120,181 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Assuming ISAs, UTs, OEICs etc, the usual commission is 3% and that would come off the bid/offer spread of the fund (the intial charge). If the 3% wasnt taken then that charge is reduced by 3%. FSA published figures show the average commission on ISAs is 1.5% initial. Although an average means some take more, some take less.

    Personally I take 1% initial although it depends on the size of the investment. I tend to cap the initial charge though so large investments would not see a 1% on the whole amount. I know a number of other IFAs who also take 1% and some that go for the maximum 3%-4% every time.

    So, on 1% charge basis, your cost would be 1% more than doing it yourself (subject to cap).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Chrismaths
    Chrismaths Posts: 931 Forumite
    Sorry, I missed the 'If' in your original post!

    A 'New Model' advisor would take 1% upfront, and 0.5% trail. HL currently rebate part of the trail to you as a 'loyalty' bonus, so the difference on an ongoing basis will be the loyalty bonus HL pay. On an upfront basis, obviously you will be paying 1% to the NMA, and it depends on what terms he has negotiated with the providers. Having looked at HL's terms, not all of the funds are 0% upfront charge, so if the adviser has negotiated away the upfront (or not) it could be more or less than 1% upfront difference.

    HTH, Chris
    I'm an Investment Manager. Any comments I make on this board should be not be construed as advice, and are for general information purposes only.
  • Oompa_Lumpa
    Oompa_Lumpa Posts: 111 Forumite
    Thanks both of you. I guess then the additional charge could be summarised as just 1% up front - with the ongoing charges being fairly similar.
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