Standard Life Wrap Product..thoughts please

JSMill

My IFA wants me to move from my current regular retail Standard Life SIPP to their "Wrap" product, a platform allowing management of all existing investments in one place. The fund value is substantial (£1.2), and it is not in drawdown. The IFA proposes increasing his commission from 0.5% to 1%, which he represents as being partly offset by reduction in SL/fund charges of 0.3%, so +0.2% overall. One good feature of the SL wrap product is that dealings are at a single NAV, but I don't think I could really explain the savings unless the portfolio is being churned like gorgonzola (which would not be good practice). I am trying to find out from SL how the savings could really be that good. In the meantime, I have learned from SL that the Wrap will in future be subject to an exit charge, whereas this does not apply to the current retail product it seems. Also, under the wrap I am obliged to use an IFA, which is not the case with the current product.
My current situation is that I am happy to use an IFA at a reasonable price but with the option to paddle my own canoe when I am less busy and so at this stage to have as few tie-ins/exit fees as possible.
Would appreciate thoughts on the wrap product as an option and any general recommendations, many thanks JSM

dunstonh

The IFA proposes increasing his commission from 0.5% to 1%

Greedy.

Would appreciate thoughts on the wrap product as an option and any general recommendations, many thanks JSM

Typically nowadays you see platforms as the main base for investments. The options to use much cheaper investments or a greater spread of other funds can make sense. Especially where institutional funds are available. So, in that respect its fine. Although would be interested to know what Std Life have that others cant do better. However, I am not a fan of Std Life. I have seen too many Std Life SIPPs which were set up to benefit the adviser and not the client. When I come across a potential new client on a Std Life SIPP I am immediately on guard for expectation of a rip off somewhere. Most common has been the use of internal Std Life funds (available on their stakeholder at 1%) being set up at higher than 1% on the SIPP.

jamesd

Your IFA appears to be treating you as a mug. With that much money involved you should be paying by fee for all services and should be getting no commission taken at all, just the fees.

What's proposed just doesn't make sense for you - it's far too expensive for any benefit it might offer you.

If you want something more competitive and don't mind working remotely, drop dunstonh a private message. Dunstonh is an IFA I'd be happy to deal with myself.

cogito

My (former) IFA wanted to push me into a SL wrap. Whichever way I looked at it, I could see nothing in it for me and plenty in it for him.

JerryC

I personally like SL wrap because of the on line audit trail. I can track all transactions, charges, fund management rebates, dividends, capital gains etc. It should also make it easy to do bed & ISA or bed & SIPP transactions. However I think your IFA's proposed commission is excessive.

My IFA charges 0.4% fund based renewal commission, zero level commission on regular SIPP direct debits and 2.5% initial commission on ad hoc investments. This on funds of about £0.6 million (wife and me combined).

With a fund twice the size I think your IFA should be charging lower commission rates than this, or a flat fee with zero commission. Since the SL wrap is of more administrative benefit to the IFA than to the client, there should be no commission charged for transferring. As your fund is over £1m you will get the highest tear of administration charge rebates and if any immediate family members also have a SL wrap account they can link to yours to get the same rebates.

As you say, you can't operate the SL wrap without an IFA. When I ditched my former IFA I was without a IFA for several months during which time I could not make any investment changes on the wrap platform though they did accept some administrative instructions direct from me. I think the exit charges have been dropped, and they were only to apply to exits in the first 12 months anyway, but I am not certain about this.

Bigsmak

JSMill wrote: »

The IFA proposes increasing his commission from 0.5% to 1%, which he represents as being partly offset by reduction in SL/fund charges of 0.3%, so +0.2% overall.

Since he is an IFA he has to offer you the opportunity to pay by fee.

Did you ask what this would be?

jamesd

JerryC wrote: »

As you say, you can't operate the SL wrap without an IFA. When I ditched my former IFA I was without a IFA for several months during which time I could not make any investment changes on the wrap platform though they did accept some administrative instructions direct from me.

That seems like a good reason to avoid it.

Or another reason for the IFA to like it, since it adds to lock in pain if you try to move elsewhere.

JSMill

Thanks to all for really useful responses, here is more info prompted by the kind words of wisdom....the IFA did NOT offer me a fee-based remuneration as an alternative to their increased commission of 1%. Also, SL confirmed that, though being considered, potential exit charges on the Wrap will not apply (which would not have been megabucks anyway). They say they changed their minds because of (gasp!) customer feedback. Has Mary Porter been round there? The part about charges applying if you exit within a year may well be true, but I did not ask them that. I have told my IFA to revert to the lower rate of 0.5% or I shall look elsewhere. Have arranged meeting with SL private client people in meantime.

Bigsmak

JSMill wrote: »

the IFA did NOT offer me a fee-based remuneration as an alternative to their increased commission of 1%.

Wow

Day 1 of the job it was drilled into me that I have to do this or I'd get in trouble. Literally Day 1, before I even was given a desk!

dunstonh

.the IFA did NOT offer me a fee-based remuneration as an alternative to their increased commission of 1%.

The FSA allow percentages to be classed as fees as long as the fee is explicitly charged. It is considered best practise to have a cap on it and/or a sliding scale. It should also not act as a deterrent for using the fee option instead of commission. Initial percentage fees should have a cap on them. There are actually very few rules set by the FSA on this front at this time. Its left open to interpretation as to what is fair. Of course, like any business, you get some that are fair and good value and then you get the greedy !!!!!!s who charge a fortune.

It is not uncommon for servicing advisers to move people between contracts over time as times change and if something better comes along then the whole point of servicing is to get that option that is better.

. I have told my IFA to revert to the lower rate of 0.5% or I shall look elsewhere. Have arranged meeting with SL private client people in meantime.

Dont use SL. Whatever you do. Find a new IFA that will value you rather than see you as a cash cow but don't use SL. Tied agents work to a lower remit than IFAs. A portfolio of your size should not be with a tied sales person.

JerryC

JSMill wrote: »

Have arranged meeting with SL private client people in meantime.

Yes, you can operate the SL wrap through their direct private client people. I spoke with them after I ditched my former IFA. It seemed to me that they were going to charge commission similar to an IFA whilst not actually being an IFA so I could see no advantage in using them.

Eventually I found a new local IFA who I could meet face to face and who was willing to charge lower commission than the SL private client person.