ISA or offshore?

JohnRo

Hello folks,

Don't want to go into too much personal detail but at the moment my earnings cover my expenses, there's really very little left to invest each month. That said I have in the past managed to save a substantial amount - over 100K - and obviously want it to work hard for me, now and in the future.

I have for the last two years trusted my savings to an IFA and being new to the whole financial investment market simply followed their advice which i'm now beginning to question having spent a lot of time reading over the last two years.

The last few weeks I've started to consider various investment options and looking at the rates and fees available, my head is spinning about whether i've been taken for a bit of a ride by my IFA.

I was advised that an offshore tax wrapper was a good option and went along with it, more recently I am feeling the benefit is perhaps more for the IFA commission than any personal tax and potential growth benefit to my fund. The wrapper is Canada Life in the IoM.

I have a lot of questions I'd really like to ask and discuss, many aspects of investment planning too, but for now do you consider the offshore wrapper was good advice?

Vincenzo

It depends on your personal circumstances but assuming you live in the UK and intend to bring the money back into the country, I can't see the benefit of off shore investing vs ISAs. Obviously it is not possible to put £100k into ISAs in one go.

JohnRo

Thanks for replying, I do live in the UK and don't expect that to change. The only advantage or benefit offshore gives over ISA, which was discussed at the time, is that the funds are held in trust for inheritence tax purposes.

My main gripe at the moment is that the commission charges seem excessive at 7% initially plus a half percent trailing commission on top of the annual management charge and administration fee. I'm posting initially to try and get opinion about the advice given and the nagging feeling I've simply been taken advantage of and the damage (if any) has already been done.

The option I've been debating is whether to begin drawing down the maximum 5% of the fund annually that's allowed by the deferred tax rules and using it to open an ISA monthly high income fund. Which brings me to another point I was hoping to gain some advice about, whether to invest in a growth or income fund ISA. The income funds I've looked at seem to pay quarterly but I'd much prefer a monthly income such as the one Schroder offer.

anyway, thanks again for the reply.

Vincenzo

You don't need to go offshore to hold funds in trust. Perhaps consult another IFA to see what they would advise?

pressuredrop_2

7%.

Nuff said.

JohnRo

The question is can a tax free ISA account be held in trust. This is the reason I was persuaded that offshore was a better option in the long run.

edit: I did have a very brief chat to a IFA from HL but they didn't seem willing to say I'd been given bad advice and there are some advantages of gross rollup over ISA apparently. The truth is I just don't know enough about the situation to make a proper comparison which is why I went with their advice initially.

Vincenzo

JohnRo wrote: »

The question is can a tax free ISA account be held in trust. This is the reason I was persuaded that offshore was a better option in the long run.

edit: I did have a very brief chat to a IFA from HL but they didn't seem willing to say I'd been given bad advice and there are some advantages of gross rollup over ISA apparently. The truth is I just don't know enough about the situation to make a proper comparison which is why I went with their advice initially.

No an ISA would not be able to be held in trust.

Approach the original adviser with your concerns. If you are still not happy that the advice was appropriate, speak to the FSA.

dunstonh

I was advised that an offshore tax wrapper was a good option and went along with it, more recently I am feeling the benefit is perhaps more for the IFA commission than any personal tax and potential growth benefit to my fund. The wrapper is Canada Life in the IoM.

If you went fee or agreed remuneration level with the IFA (which is nearly always the best way) then the tax wrapper doesnt make the slightest bit of difference to the IFA.

Even if you went commission basis, the levels are largely the same.

but for now do you consider the offshore wrapper was good advice?

Impossible to say based on what you have posted so far.

My main gripe at the moment is that the commission charges seem excessive at 7% initially plus a half percent trailing commission on top of the annual management charge and administration fee.

So why are you choosing to go on commission basis and not fee basis? That same 7% exists on onshore bonds so the wrapper is not the issue. However, your choice to go commission is just plain silly. You could have gone fee basis at around £1000-£2000 initial fee with 0.5% p.a. for servicing. Your current IFA is greedy. Amazingly greedy. You know when you get a builders out to give you a quote and the prices vary from £10,000 to £25,000. Then you have the £25,000 one. To put that in perspective, the FSA recorded the average commission/fee for collective investments taken via the product and found 1.8% initial and 0.5% p.a. was average. Look at your 7% plus 1%pa compared to that.

ISA is a priority. Using the 5% deferral to pay into the ISA is often common sense. Although if there are trusts involved, they would impact on that and could prevent it being suitable

JohnRo

Thanks very much for the reply, I won't go into why I chose this IFA, suffice to say I made a mistake but the sinking feeling I've got over the last year or so seems to be confirmed, it's not a total disaster I'll just have to look on it as a valuable and very expensive lesson.

the trailing commission is just 0.5% btw.

jem16

JohnRo wrote: »

plus a half percent trailing commission on top of the annual management charge and administration fee.

JohnRo wrote: »

the trailing commission is just 0.5% btw.

You might want to check this out. Your initial post says half percent trailing commission on top of the annual management charge. The amc normally includes the 0.5% trail commission so your implication is that another 0.5% is being charged on top.

JohnRo

Thanks,

I've asked them to provide a clear and concise breakdown of the initial and trailing commission and management charges. I don't suppose there's any case to answer for misselling, I feel like a fool for trusting them as they dealt with other family members for many years, being ripped off never occured to me but that's clearly no ones fault but my own. Hopefully I can work out a strategy for how to limit the damage going forward.