Advice on the product that my IFA has suggested

mogwa101

Hi,

I have just had visit from an IFA via the union at work he has recommended the following product to invest in instead of my current Natwest Cash ISA:

F & C Lifestyle ICVC using the F & C Lifestyle Cautious Fund. Which on there scale of 1 to 8 of has Risk and Reward Profile of 5.

He said the figures he has done are based on growth rate of 7% a year.

The IFA fees for this are covered by the provider.

The initial commission if 3.00% and the annual commission is 0.500 %.

Does anyone have any experience of this company and/or product? Do the fees look reasonable for this type of product?

Lokolo

How much are we talking about?

3% on £1000 isn't a lot.
3% on £1million is a lot.

You talk about comission but then say IFA fees are covered. Are the charges you posted the fund charges or the IFA charges?

mogwa101

The initial transfer from my cash Isa is £33,500.
Looking at the figures he quoted if I transferred all the above into the fund and then did not pay any more in then after 10 years I should end up with £52,220 assuming the 7% growth rate.

On the form it says "Your financial adviser will be paid the following for investment in the fund:"

Initial commission 3%
Annual commission 0.500%

This would amount to:

Initial commission:
For initial lump sum investment: £1005

Annual commission:
This is based on 0.500% of the value of your investment each year.

Lokolo

Then personally, from the look of the work done, it's quite expensive.

I would also not be expecting the IFA to get any annual comission unless they are going to have annual reviews.

I would also be skeptical of getting 7% a year in a cautious fund. Just because he says you could get 7% doesn't mean you will, and if you don't it's not his problem.

xylophone

If you are thinking about transferring your cash ISA into a stocks and shares ISA, you might want to do some more research first.

Remember that this is a one way street - you cannot transfer back into a cash ISA. If your cash ISA represents the bulk of your savings including your emergency fund, you might want to think carefully.

mogwa101

He did mention that he would come and see me every 6 months to review things.

mogwa101

Can I have both the current cash ISA and this F & C product?. I do also have £13k in a normal e savings account with Natwest. I am bit new to this type of investing as up to now I have just maxed out the cash isa limit for the tax year and then payed the rest into my normal savings account.

Lokolo

Right, well that makes the 0.5% comission more meaningful.

I would wait for resident IFA Dunstonh to comment. I think the 0.5% is OK but I think the 3% is a little expensive for the work he's done.

mogwa101

Apparently it is normally 5%.

jem16

mogwa101 wrote: »

Can I have both the current cash ISA and this F & C product?.

Yes you can as it's a transfer and not new money.

The fund you are being recommended is a multi-manager fund which usually comes with a higher amc as there is automatic rebalancing going on.

You mentioned the IFA doing 6 monthly reviews - I would have thought yearly would have been enough but no matter. 0.5% would be normal if there is ongoing servicing - in fact it's quite good for such a low sum as many are using 1% for anything below £100k.

The initial commission of 3% is quite high though. With only £33.5k involved there is not a lot of scope for discounting but perhaps try to get it down to around 2% as that is just a little higher than the average commission.

Have you asked the IFA what it would cost on fee basis rather than commission basis? I would do so.

mogwa101 wrote: »

Apparently it is normally 5%.

Then he's having a laugh!

Standard commission rates for collectives via IFAs is usually a maximum of 3% with 1.8% being the average. However as commission is being banned from the end of this year I would be asking about fee basis.

sabretoothtigger

1000 alot to pay for some simple advise. I'd pay myself the 1000 and do 40 hours research on various possibilities, spread it out over a few weeks.

I'll give you a starting point. Asia Pacific tracker unit trust. Newton Asia income is mentioned in finance pages of newspaper like telegraph as it has high dividend so if justified it'll pay dividends and maybe you grow the money on top.
But if you want basic simple low risk, personally I rate Asia pacific tracker over the ftse 100 as both are foreign facing funds and asia should grow more. FTSE is one currency, this one is spread over five and so more diverse for balance, etc

You can at least weigh it up yourself and if you cant decide then your'll still have a better idea when talking to anyone

40 hours at 25 quid an hour sounds like easy work to me, its only reading and graphs. Just reading the newspaper would probably rank equally to this guys advise imo

Equally important if DIY then you'd need to read on how best to buy a fund yourself instead of using the middleman.
A good IFA may be worth having as a manager but they do have to know their stuff not just be a salesman and thats what often happens I reckon. I think its been stated its better to agree a straight fee and have the IFA hand back commissions. Thats comparable to DIY as you can always compare that fee easily