Transfer charges on ISA

dunstonh

No its not. They dont give up the trail, the adviser gives up nothing - its indemnified initial £850 X 4% X 60 months =£2040!

Cant you read?

No its bloody awful- Sterling exists for commission hungry salesman - im trying to understand why another IFA would try and justify this.

What is awful about it then based on what is written so far?

I thought the IFA did the shopping around on behalf of the client?

Really? How many IFAs have you shopped around with for your clients?

ChrisMeech

Just a small add on as have just discovered our son also signed up with the FA. He's paying £410 a month into an IFDS Omnis Balanced (which is also where all of ours is). Or actually he isn't because he is being charged 4% (£16.41) a month. In the 4 months since he started the £1640 he's paid in has become £1630.12.

What would you all suggest he does? Transfer it? Leave it where it is? Join the husband and I in jumping off the Itchen Bridge?

dunstonh

What would you all suggest he does? Transfer it? Leave it where it is? Join the husband and I in jumping off the Itchen Bridge?

You can get cheaper. That much we have cleared up already. However, you either need to find another IFA that will do it cheaper or you can DIY.

jimjames

To me it seems like splitting hairs to separate out the commission and charges payments. In reality it makes no difference - you've been charged them and your investment still needs to grow by that amount to break even regardless of the name that is given to the money you have paid out.

Much the same as buying petrol - it doesn't matter if the fuel duty is £10 and VAT is £20 or vice versa - my bill at the end of the day is still the same!

With the new figures provided above it looks even worse than it originally seemed. £7700 commission plus £2000 initial charges seem horrendous. In my perhaps naive viewpoint it would seem that Sterling paying their commission up front rather than as a trail over the length of the investment could make them a more attractive option for advisers than a more suitable investment that doesn't pay out up front. Maybe it doesn't happen but it would certainly seem to give an incentive to use Sterling over others.

6 hours work for £7700 is pretty easy money in most people's books. Even IT consultants are only normally charged out at £1000+ per DAY.

jimjames

dunstonh wrote: »

You can get cheaper. That much we have cleared up already. However, you either need to find another IFA that will do it cheaper or you can DIY.

What is the effect if they transfer? What happens to the commission paid out now on the basis that it will be earned over the next 5 years and now won't be earned by the company? Will they lose out from that?

dunstonh

To me it seems like splitting hairs to separate out the commission and charges payments. In reality it makes no difference - you've been charged them

Its not because the charges do not equal the commission at this stage. At this moment, the commission is higher than the charge.

What is the effect if they transfer? What happens to the commission paid out now on the basis that it will be earned over the next 5 years and now won't be earned by the company? Will they lose out from that?

Sterling clawback the indemnified trail from the adviser. So, the OP wont be liable for that bit. The initial charge though is lost. On the son's regular, there will be a clawback to the adviser as well, not the son.

feesarefare

dunstonh wrote: »

Sterling clawback the indemnified trail from the adviser.

Luckily I can read Dunstonh - I also know the difference between trail and level commission, why dont you?

Level commission is paid from the initial charge made on each contribution.

Trail commission is paid from the annual management charge.

Therefore in this case for every regular contribution Sterling make an initial charge of 4.75% of which 4% is paid to the "adviser".
The indemnified level commission is proportionally clawed back if the regulars stop in the first 5 years.

Its very disappointing that there are sharks out there recommending the most expensive option just to line their own pockets. There is no justification for a Sterling ISA. There are just so many cheaper options out there.

Looking a there overall sales process what happened to the commission disclosure?

If the FSA want to sort out the bad IFAs they could just get a list of the ones that use Sterling ISA's- it would be alot cheaper than the RDR.

jimjames

dunstonh wrote: »

Its not because the charges do not equal the commission at this stage. At this moment, the commission is higher than the charge.

I think I understand now - I'd not realised advisers/fund managers had been so inventive about designing charges.

When the OP said they had paid the commission up front I assumed that was what it meant - not that the fund managers had effectively lent the adviser 5 years worth of commission at the point of sale. To be lending money like that just seems to be another way to bump up the charges to the poor old investor as someone has to pay for that loan.

I'd be pretty wary of a fund manager that designed their products purely to suit commission payments but I'm clearly missing the bigger picture.

dunstonh

When the OP said they had paid the commission up front I assumed that was what it meant - not that the fund managers had effectively lent the adviser 5 years worth of commission at the point of sale. To be lending money like that just seems to be another way to bump up the charges to the poor old investor as someone has to pay for that loan.

It doesnt increase the charges. Its the same whether they do it upfront or take it on drip. Its just a case of whether the adviser gets paid up front (the old sales model) or whether its paid annually.

I'd be pretty wary of a fund manager that designed their products purely to suit commission payments but I'm clearly missing the bigger picture.

Look at the background of Sterling. Zurich, Allied Dunbar....

Ghengiseanie

...and Interalliance before and Lincoln before that. The entire IFA market is full of sharks and commission driven sales people. Very untrustworthy people.. Even the FSA and "Fact Finds" are merely sales tool to allow for "Needs analysis"/"needs satisfaction" "spin" selling.
The problem in this case is often repeated.

An IFA is a person of knowledge (allegedly) The client has to have some degree of trust.
When a guy has performed well previously you do not expect him to throw a curve ball like this. Ultimately the OP has suffered due to trust. The message to take away as many people will say again and again is as follows.

1)READ THE KFI's/FEE AGREEMENTS ETC.
2)Shop around. ALWAYS. Even if its your relative or something selling you the product. SHOP AROUND.
3)Become AS AWARE of the products and how they work as you possibly can. Without that, a complete laymans level of knowledge simply will not be enough to test the information being given to you by an IFA.

This is not info just for hte OP but for anyone looking at financial products.