Cavendish online and Fidelity

ViksB

Wow, Thanks guys.
I think I have finally got my head around all this and all understand where everyone makes their money.
Thanks for the advice for us less experienced!!
Viks

oldfella

It might do, but that's still rubbish. None of my client's have paid an initial charge on a unit trust or OEIC in years. So that basically means that you could go to an advisor who charged 2% upfront and rebated the trail, and still be better off than with Cavendish.

---

thats a bit harsh - it depends on the fund - the funds that I buy are 0% initial with trail commission refunded - all I pay Cavendish is £10 a year

Mike

moneyandmountains

oldfella wrote:

as far as I remember, the Cavendish discount isnt visible when you buy online - but when the info arrives its discounted back to 0% initial charge.

This used to not be visible online.
However, the last funds I bought showed in it the KFD generated on buy.
Maybe this is a change by Cavendish / Fidelity.

moneyandmountains

Chrismaths wrote:

If you go to Cavendish, they will rebate you the 3%, (for a fee of £35), and then rebate you the 0.5% trail commission

Are you thinking of pensions? Cavendish is £20 fee.

For comparison, I have run some numbers through.
Would someone mind checking this, as I am not too big to admit I may be barking up the wrong tree.

£7000 ISA investment
Assume investment growth of 7%.
Trail rebated for Cavendish have the £10 deducted in the figures below.
Lets assume 3% interest (net) on the cash rebated from the Cavendish commission.
NMA Terms - 1% initial fee, 0.5% trail.
Cavendish Terms - 2% initial fee, £20 initial charge, £10 annual charge, trail rebated.

	Cavendish	NMA	Cav Trail Rebate		Year	Cavendish
Investment	7000	7000	-10 fee			Total Value
Initial Charge	140	70		Rebate Running total		
Initial Fee	20					

Year 0 Value	6840	6930				
7% increase	478.8	485.1				
Year 1 Trail	10	37.0755	27.0755	27.0755		

Year 1 Value	7318.8	7415.1			1	7345.8755
7% Increase	512.316	519.057				
Year 2 Trail	10	39.670785	29.670785	57.55855		

Year 2 Value	7831.116	7934.157			2	7888.67455
7% Increase	548.17812	555.39099				
Year 3 Trail	10	42.44773995	32.44773995	91.73304645		

Year 3 Value	8379.29412	8489.54799			3	8471.027166
7% Increase	586.5505884	594.2683593				
Year 4 Trail	10	45.41908175	35.41908175	129.9041196		

Year 4 Value	8965.844708	9083.816349			4	9095.748828
7% Increase	627.6091296	635.8671445				
Year 5 Trail	10	48.59841747	38.59841747	172.3996606		

Year 5 Value	9593.453838	9719.683494			5	9765.853499
7% Increase	671.5417687	680.3778446				
Year 6 Trail	10	52.00030669	42.00030669	219.5719572		

Year 6 Value	10264.99561	10400.06134			6	10484.56756
7% Increase	718.5496925	728.0042937				
Year 7 Trail	10	55.64032816	45.64032816	271.799444		

Year 7 Value	10983.5453	11128.06563			7	11255.34474
7% Increase	768.8481709	778.9645942				
Year 8 Trail	10	59.53515113	49.53515113	329.4885785		

Year 8 Value	11752.39347	11907.03023			8	12081.88205
7% Increase	822.6675429	833.4921158				

So in Year 4, the total value including commission rebated of the Cavendish solution would be £9095.75.
Bought through a NMA with 1% initial fee, 0.5% trail, the portfolio value would be £9083.82.

Edit: Now with Code switch

Chrismaths

That's fair enough, but with an NMA, you'll also receive advice and ongoing servicing - your table (which I'm struggling to read - try using the [code] switch) shows how cheap that advice is compared to doing it XO. Dh said he usually did terms of 0% upfront and 0.5% trail for XO business, so that would be a fairer comparison.

Without calculating the figures, that would probably push the breakeven level out to year 5 or 6 at least, and given how often fund managers can change jobs, and periodic rebalancing - you are unlikely to hold the majority of your funds for that long.

dunstonh

rebalancing and updates account for the bulk of the work. No doubt that is similar for you CM on the portfolios you manage.

Those figures go to show that the cost of advice isnt that bad. Over four years, £12. In that time you would have had valuations, rebalancing, fund updates etc. For the person that really likes to do DIY and enjoys the investing and monitoring thats fine. However, it shows that the pressure put on people sometimes to go DIY with costs being the reason is perhaps not the best course of action.

moneyandmountains

dunstonh wrote:

Those figures go to show that the cost of advice isnt that bad.

This is what I would agree with. Don't get me wrong, I am not against advice.

I was just trying to show a fair comparison between the execution only modes. As has been said before, a NMA or H&L may be able to do it cheaper.

I am not sure that many advisors, even NMA, are as flexible as dunstonh though.
I know for a fact that some don't really much care about maintaining current business, apart from sending out the cursory annual valuation.

I am aware that you can list UK Advisors/Qualifications through IFA Promotions https://www.unbiased.co.uk webpage. However, is there any list of New Model Advisors around?

dunstonh

I am aware that you can list UK Advisors/Qualifications through IFA Promotions www.unbiased.co.uk webpage. However, is there any list of New Model Advisors around?

Not yet. Citywire seem to be building a database through articles in their weekly publication. Although at the moment it seems to be larger regional firms they profile. 3-4 a week seem to be profiled so there is enough to go round.