Advice on the product that my IFA has suggested

dunstonh

There are two things here. One being the initial cost of advice and one for ongoing servicing.

A small investment like £30k is not going to get the same sort of terms that a £100k or £1 mill investment is going to get. I would say anything between £500 and £1000 is the sort of range you would want.

As for ongoing if I would offer two options. No ongoing servicing but you pay when you need it or charge you closer to 1% as 0.5% isnt enough to justify the level of work required. I certainly wouldnt offer 6 monthly reviews on 30k. It is unaffordable and unsustainable and given the fund choice, it is pointless. I would steer to no servicing unless it was needed and pay for it then say on a two year basis or ad hoc.

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.

The FSA used to publish the averages on commissions. It found the typical maximum commission was 3% and the average was 1.8%. I would expect a £30k investment to be at or around the 3% mark.

BLB53

£1000 commission is a lot for this advice/product - I would think hard whether you wish to proceed and take your time.

You could easily get a similar product direct via the likes of hargreaves lansdown and no £1000 fee.

Do a bit of research - have a look at monevator.com - some really good articles.

Its not so difficult once you start!

Good luck.

Totton

3% initial plus 0.5% annual is silly money for a simple single fund portfolio such as suggested. Your costs are going to be around £1000 initial plus £165 a year to start with, why pay that when you can have a Hargreaves Lansdown (or similar) ISA account for £45 a year.

The suggested fund has a risk score of 55 on Trustnet but don't be misled by the term cautious as it is not a savings account. Its' TER is 1.96% which is pretty good for a fund of funds where often the costs are closer to 3%, remember that the fund TER is additional to your annual fee!

Over 3 yrs it has returned 29.43% versus 49.58% by Troy Trojan which is of course in a different sector but still a popular fund for cautious investors.

The F&C fund is shown as having the following top 10 holdings -

FIDELITY STRATEGIC BOND INC
BROWN ADVISORY AMERICAN A GBP
JUPITER GROWTH & INCOME INC
INVESCO STERLING BOND A
BLACKROCK UK FOCUS FF
SCHRODER UK ALPHA PLUS A ACC
BLACKROCK EUROPEAN DYNAMIC A ACC
F&C FTSE ALL SHARE TRACKER 1 INC
SCHRODER UK CORE A ACC
GLG JAPAN CORE ALPHA RET ACC

HTH,
Mickey

jem16

Totton wrote: »

why pay that when you can have a Hargreaves Lansdown (or similar) ISA account for £45 a year.

That's only for shares, ETFs and ITs. It's not for funds. For funds like the one the OP is being recommended there is no ISA fee but there is the TER of the fund plus in the case of trackers, a £2pm per fund platform fee.

Its' TER is 1.96% which is pretty good for a fund of funds where often the costs are closer to 3%, remember that the fund TER is additional to your annual fee!

If you are referring to the IFAs annual fee, it is not additional to the TER - it's part of it. The IFA's 0.5% is paid from the TER.

The simple answer is that if you can DIY then you will save the cost of advice but you need to do the research first.

grey_gym_sock

well, you could certainly get a similar risk level, with much lower charges, by buying one of the Vanguard Lifestrategy funds via Hargreaves Lansdown.

those Vanguard funds only hold equities and bonds. the 60% equity fund (or 80%?) would be nearest to this F&C fund.

the F&C fund also holds some property (c. 11%), so Vanguard doesn't give you quite the same asset allocation.

but the charges are a lot lower. the only initial cost is a 0.27% dilution levy (compared to 3%). the on-going annual cost is 0.31% TER plus Hargreaves Lansdown's fee of £2 per month, which would add about another 0.07%, making a total of 0.38% (compared to 1.96%).

i don't know which option will give better returns. but then nor does the IFA. this is more to illustrate the possible difference in charges for DIY or IFA.

bigfreddiel

Totton wrote: »

why pay that when you can have a Hargreaves Lansdown (or similar) ISA account for £45 a year.

why pay £45/yr when td direct investing has no charges?(other than dealing which can be £1.50)

fj

Totton

bigfreddiel wrote: »

why pay £45/yr when td direct investing has no charges?(other than dealing which can be £1.50)

fj

Well I did also say 'or similar' to suggest the OP could look at alternatives.

From my own viewpoint though I have used several of the others and have received the most reliable and helpful service from Hargreaves Lansdown, they don't quite beat the old American Express Sharepeople service I had but they aren't around now so for me it is HL.

I did have an account with TD but sorry it wasn't as good for me, others experiences will no doubt vary. Thankfully the market does have several options for us investors :-)

jem16

bigfreddiel wrote: »

why pay £45/yr when td direct investing has no charges?(other than dealing which can be £1.50)

fj

How do you think TD Direct will change to be compliant with RDR?

Totton

jem16 wrote: »

If you are referring to the IFAs annual fee, it is not additional to the TER - it's part of it. The IFA's 0.5% is paid from the TER.

That is good to read although I still wouldn't pay it on a portfolio of that size. Will the IFA's fee continue to be paid from the TER post RDR though?

jem16

Totton wrote: »

Will the IFA's fee continue to be paid from the TER post RDR though?

Trail commission would continue on investments already in place before RDR. However if there was to be a fund switch after RDR then the charge would have to be explicit but you would find the cost of the fund to be reduced by the same 0.5%.