Bestinvest - Investment Advisory

mbailey

Anyone have any experience of this service?

On paper is looks like a good idea, there are no initial charges and no annual charges, the only costs being the AMC which the funds pay to Bestinvest and none of this is rebated.

However it appears BestInvest don't make much money out of it, so I wonder what sort of service they really offer?

As a comparison I have contacted an IFA and they have suggested they could do something similar for me but they would take a 1.5% initial commission (originally 3%, but later agreed to half with me) plus an annual fee of £150.

This is for a 10k investment in an ISA in March, and then another 10k in April.

The investment will be a selection of funds looking longer term, 5 to 10 years minimum, with a medium to medium-high level of risk.

I see Hargreaves and Landsdown have a similar service, but they seem to want a minimum of £30k before they will even talk to you.

dunstonh

On paper is looks like a good idea, there are no initial charges and no annual charges, the only costs being the AMC which the funds pay to Bestinvest and none of this is rebated.

Only issue I have is that they are using commission paying funds only. Not non-commission paying and that the model does not comply with RDR changes coming in at the start of next year. So, the charges will have to change between now and then.

As a comparison I have contacted an IFA and they have suggested they could do something similar for me but they would take a 1.5% initial commission (originally 3%, but later agreed to half with me) plus an annual fee of £150.

This is for a 10k investment in an ISA in March, and then another 10k in April.

To be honest, I am surprised an IFA would do a servicing portfolio on just £20k. It cannot be profitable for them unless you are buying a model portfolio rather than a personalised portfolio (model portfolio being what the others do that you mention).

mbailey

dunstonh wrote: »

Only issue I have is that they are using commission paying funds only. Not non-commission paying and that the model does not comply with RDR changes coming in at the start of next year. So, the charges will have to change between now and then.

So I assume this means that they won't be recommending any funds which are non-commission as they will get nothing for it. Do you know what proportion of funds today are non-commision already today?

Not sure I fully understand the effect of RDR yet and have read mixed messages from bestinvest implying they are in a good position and it won't affect them.

I was under the impression that all money invested before 1st Jan 2013 could continue with the trail money, but only new money after 1st Jan 2013 had to be done differently. Is that the case?

dunstonh wrote: »

To be honest, I am surprised an IFA would do a servicing portfolio on just £20k. It cannot be profitable for them unless you are buying a model portfolio rather than a personalised portfolio (model portfolio being what the others do that you mention).

The comment from the IFA is that the fund choice is specific to myself and my risk attitude. I have already had a 1 hour free consultation with the IFA to discuss everything. (I am a little sceptical that it is just a model fund as you say.)

I get the impression the IFA would be happy to do it for this "small" investment as they would hope to get me on their books so to say and then sell further products in future years.


The whole thing with RDR is very confusing today until all the IFA's and discount brokers declare what financial model and charges they will be working with next year.

dunstonh

So I assume this means that they won't be recommending any funds which are non-commission as they will get nothing for it. Do you know what proportion of funds today are non-commision already today?

At a guess around 70% are commission paying. In 10 months time, none will be.

Not sure I fully understand the effect of RDR yet and have read mixed messages from bestinvest implying they are in a good position and it won't affect them.

When the 0.5% trail commission is turned off for all funds across all distribution channels then you have ask how it cannot affect them.

I was under the impression that all money invested before 1st Jan 2013 could continue with the trail money, but only new money after 1st Jan 2013 had to be done differently. Is that the case?

It will stay on funds purchased but on new purchases (including fund switches) there will be no trail on those.

donniej

Not sure I fully understand the effect of RDR yet and have read mixed messages from bestinvest implying they are in a good position and it won't affect them.

To expand on what dunstonh said, RDR will mean that funds won't be paying commission to the provider (as mostly they do currently.) The provider will have to make an explicit charge instead. The idea is to make the fees more clear - but investing won't (necessarily) become any cheaper.

My understanding is that online discount brokers aren't immediately affected by RDR - the FSA is still discussing how RDR will be applied to them. I'm not sure whether BestInvest Ivestment Advisory service would come under that banner - that may be why they say it won't affect them in 2013 (but it may still affect them later, if/when the FSA decides that RDR should indeed apply to online brokers.)

There are quite a few online brokers offering model portfolios based on risk levels (which is what it sounds like your IFA is offering you.) Chelsea FS, Fidelity, rplan.co.uk, HL all offer something similar - and most likely cheaper than what an IFA would charge (usually 0% initial commission, and some offer a trail commission rebate too, which means that you pay less commission on an ongoing basis.)

You may want to check whether the £150 fee is on top of the trail commission or whether you are getting the trail refunded. (As you noted, the trail comes out of the annual fund charge and gets paid from the fund manager to the adviser.)

Finally, the TER is usually a better indicator of cost than the AMC (the TER is the AMC + other expenses charged by the fund manager), but still isn't an accurate measure of what you end up paying (both the fund manager and the IFA/broker.) See trueandfaircampaign.com