commission v fees

dunstonh

Answer the questions on the thread Ed. Put up or shut up.

Tiggs_2

laughable that the advice to someone being sold a bond in trust for IHT saving with (one assumes) a potential tax saving of £200k+ is to put in a bank account and dont worry about tales of the tax "boogey man"

theres always some iffy advice flaoting around here from people with no idea what they are commenting on but £200k loss is still pretty impresive.

Maybe we should have a league table for rubbish ideas and how much they would cost the OP?

jem16

EdInvestor wrote:

PS Don't worry about the inevitable argument that will crop up with the advisors as above, they always defend investment bonds because they (and the industry) make so much money out of them.

The inevitable argument that "crops up" with the advisors does not happen because they are trying to defend the product. It happens because they are trying to correct the misinformation(or downright lies ) that keeps getting spewed out each time they are mentioned.

What is preferable - truth or fiction?

EdInvestor

The OP's relative should be able to invest directly into a selection of funds on a tax-free basis via a discount broker and obtain a tax-paid income in the 4-5% range, plus additional tax free capital gains for growth without paying more than 100k to an insurance company /IFA.

I would suggest s/he checks out the site of the biggest discount broker https://www.hargreaveslansdown.co.uk for a start, and then spends some time looking around the website https://www.fool.co.uk for further information about retirement investing,asset allocation, tax planning, and the need to avoid insurance company ripoffs.

It won't take much effort to figure out that an investment bond is not the way to go for anyone who is wanting to conserve and grow capital, while also taking an income, rather than extract the capital with its earnings going to the the salesman and the industry for being so kind as to provide the system for doing it.

Of course if the latter is the plan, then the bond is just the thing......

jem16

EdInvestor wrote:

The OP's relative should be able to invest directly into a selection of funds on a tax-free basis via a discount broker and obtain a tax-paid income in the 4-5% range, plus additional tax free capital gains for growth without paying more than 100k to an insurance company /IFA.

So these funds can be written into TRUST?

Tiggs_2

Ed,

the OP mentions IHT in THE FIRST SENTANCE of their FIRST POST.

to go on about discount brookers is just nonsense...your suggestions could potentially cost the OP's relative many hundreads of thousands in lost tax.

and why would any adviser on here "defend" something simply because they earn from it?

i earn a lot from bonds....but i am never likley to earn a penny from someone on this site so what do i care? why would i go out and earn £20k from a client then feel the need to come on here and somehow justify that?

the advisers here do so to help others - as theres no money in that why would they be biased? in fact you say the reason for the selling of bonds is commision - as MSE forums pay none why would there be any pushing of a product in an enviroment that makes ZERO commision?

janemw

blimey! you can tell I'm new to all this. have not even got the hang of using the forum yet with quotes etc.

you're correct in thinking that I probably don't know enough about this to go headlong into it yet. so I have a few more questions.
Chrismaths - what are allocation rates in relation to this case? and as you say, the investment wil be in a variety of vehicle inside the wrapper.
Ed - I am wary of mis-selling, this relative has already been duped into buying worthless shares by phone.
what is the "age allowance" you mention?

I have used the IFA in question before, but I feel embarrassed to put questions about charges and commission to him (I know that sounds stupid) as I am very conscious of how little I know and that I may not understand the reply.
The main object of the investment is to save IHT,and the 5% income taken from the capital is a way of moving some of the money out of the estate.

EdInvestor

I would suggest that the OP's rellie, as a basic rate taxpayer taking a 5% net income pa, after 10 years of investing directly outside the bond and paying virtually no charges, should s/he then pass away, the estate [net of IHT @40%] would be as much as double what it would be if the bond/trust was used.

We often find that these so-called tax-saving measures are just an excuse by the industry to gobble up the investor's money.Take pensions: Over a 25 year period, between 25 and 30% of contributions are taken in charges by the industry. That's equivalent to the amount added by the Government in basic rate tax relief. Unfortunately with investment bonds there is nothing being added and the charges are even higher and guess who's paying?

There's no need to pay 30% in charges to the industry and earn naff returns from the smaller amount invested.The OP will do better to invest properly and then pay the IHT on the much larger pot at the end.

[Oh and BTW, as far as long term care is concetrned, look into an immediate needs annuity, which is guaranteed to pay the cost of care for the rest of the rellie's life if/when he/she goes into a home . For someone already aged 85 with a few years to go yet before it's necessary ( if it ever is), this is very affordable, you will barely notice it at less than 100k in total.]

My advice to the OP is to take your time and do a bit more research into this whole issue.There's no rush. And don't invest in anything you don't understand.

Tiggs_2

you MUST ask the IFA!!!!!!!

listen, this guy is going to make a LOT of money of this case....and thats fine, if he ends up saving you £200k + in IHT then he's earnt every penny .....BUT you must be able to discuss it with him.

i work in large investments all the time, sometimes for millions so you can work out what commision i can get based on what you are paying for just a few hundread k ....it can be significant - but i NEVER dont discuss it in detail and in all my years i have never had a client question it once explained.

IHT planning done right can save HUGE sums.....i have saved clients many millions of pounds of tax over the years and get paid the same as anyone with an ability to achive that - very well. If your IFA is confident in what he's suggested he should be HAPPY to tell you why he's earnt his money.

of course there are cheaper options and you could get a NMA to do the same thing for less but thats about nothing more than saying you want to see the IFA earn less so you make more (which is fine if thats your opinion)....it has little to do with the actual advice.

Tiggs_2

EdInvestor wrote:

There's no need to pay 30% in charges to the industry and earn naff returns from the smaller amount invested.The OP will do better to invest properly and then pay the IHT on the much larger pot at the end.

luckily no one has mentioned a plan that pays 30% in charges.

and the suggestion that "proper" investments will be able to loose 40% in tax and still beat an industry soloution that doesnt is pie in the sky!