Fees 30 April 2014 at 10:35PM in Savings & Investments 5 replies 797 views

Gettingeven

Can someone explain to me how an advcie fee can be called an advice fee when it's deducted from the product? I mean, I wanted to invest the maximum in an ISA at the end of the last tax year and the advsier told me that the fee would be deducted from the investment. Surely that I means that I havent invested the maximum I could have done, doesn't it? Why can't they charge that fee separately?

Aegis

Gettingeven wrote: »

Can someone explain to me how an advcie fee can be called an advice fee when it's deducted from the product? I mean, I wanted to invest the maximum in an ISA at the end of the last tax year and the advsier told me that the fee would be deducted from the investment. Surely that I means that I havent invested the maximum I could have done, doesn't it? Why can't they charge that fee separately?

They can, product facilitation of charges is an option, not a mandatory requirement. Tell your adviser you want to preserve the maximum in the ISA and ask to be invoiced separately for the fee.

dunstonh

Can someone explain to me how an advcie fee can be called an advice fee when it's deducted from the product?

A fee is agreed in advance. How you choose to pay it doesnt matter. It could be by cheque, bacs, chaps, bank transfer or via the product. Payment method doesnt give it a different name.

I mean, I wanted to invest the maximum in an ISA at the end of the last tax year and the advsier told me that the fee would be deducted from the investment. Surely that I means that I havent invested the maximum I could have done, doesn't it? Why can't they charge that fee separately?

The fee can be paid separately. Some allow the fee to be added to the ISA allowance and paid by the provider. Or you can write a cheque for the ISA and a cheque for the fee.

Next time, tell the adviser you dont want the fee to be paid out of the ISA.

Gettingeven

Apparently if the fee is taken from the investment there is no VAT? If it's charged seprately, VAT applies?

dunstonh

Gettingeven wrote: »

Apparently if the fee is taken from the investment there is no VAT? If it's charged seprately, VAT applies?

No. The method of payment of the fee has no impact on VAT whatsoever. That was an old wives tale in the industry that was put to bed a couple of years ago by HMRC.

VAT is charged on advice or service where there is no intention to buy a financial product. VAT is not charged where the intention is to buy a product. Even if the product purchase does not take place in the end (i.e. intention to invest but decided not to).

There can be administrative advantages of paying a fee via the investment. Unwrapped investments would have a clear audit trail of the fee which can help CGT calculations. Pensions paying the fee means you get tax relief on the fee. However, there is not VAT advantage.

Aegis

Gettingeven wrote: »

Apparently if the fee is taken from the investment there is no VAT? If it's charged seprately, VAT applies?

As dunstonh says, your adviser does not understand the VAT exemption for intermediation. Where the fee is paid from makes no difference to the VAT-treatment.