Charges Canada Life

bakescakes

We have $144k USD to invest- it is offshore currently as it was saving from working abroad- we have an IFA- Vestra Wealth who will take 1.5% and they have suggested a wrapper- Canada Life who also take a massive slug- they charge 0.5% annually, plus an initial $1.4k, their projections go like this:

Total paid in after fee $143- yr 1, costs $6.2
Total charges of $6k ish per year means 10 years their fees are $64k!!!

So at a 5% return yr on yr for 10 years, they make $64k, and we make $26k- that strikes me as nuts! It means if the investment grows by 5%, due to costs, we only get 1.7% if we leave it for 10 years with no withdrawal.

Ontop of this we have to pay Vestra wealth an annual fee to invest the monies and I assume the funds they use will also charge- so does that mean we are basically paying at least 3 levels of charges- and how likely are we, in that case to get any decent return ?

I am so fed up of the whole industry being so opaque, and needing a degree in finance to read the documentation. I am also not sure what our options are - any IFA will charge 1.5%, all funds charge fees and we need an offshore wrapper of some kind.

We have some money in an ISA tracker and intend to max out any spare savings on our own ISA trackers to offset the active investment- we have some money in long term fixed rate bonds, but this is our largest pot and I am worried it's just there for people to take % off here there and everywhere.

Are we mad to do this ?

bugbyte_2

In a nutshell, yes. Sounds an awful deal. IF it makes 5%? what happens if it looses 50%? you would still pay the charges and end up with practically nothing!

Depending on your risk tolerance, you can easily invest it in cash ISA's, Bond funds or equity funds for a tiny fraction of that cost.

Linton

bakescakes wrote: »

We have $144k USD to invest- it is offshore currently as it was saving from working abroad- we have an IFA- Vestra Wealth who will take 1.5% and they have suggested a wrapper- Canada Life who also take a massive slug- they charge 0.5% annually, plus an initial $1.4k, their projections go like this:

Total paid in after fee $143- yr 1, costs $6.2
Total charges of $6k ish per year means 10 years their fees are $64k!!!

I dont understand your maths 1.5% + 0.5% = 2% = approx $3K/year.

What investments are Vestra proposing? Are they managing all the investing or do you have control?

Linton

bugbyte wrote: »

In a nutshell, yes. Sounds an awful deal. IF it makes 5%? what happens if it looses 50%? you would still pay the charges and end up with practically nothing!

Depending on your risk tolerance, you can easily invest it in cash ISA's, Bond funds or equity funds for a tiny fraction of that cost.

5% is an undemanding return, it depends what funds are being used.
I am unclear how you propose to invest offshore $'s in an ISA
A sensibly balanced investment portfolio wont lose 50% unless we have an "end of the world as we know it" event, in which case all bets on anything are off.

Daniel54

bakescakes wrote: »

all funds charge fees and we need an offshore wrapper of some kind.

Are we mad to do this ?

This would appear to be an offshore investment bond which might suit your specific purposes.In his report to you the IFA should have set out the alternatives and summarised why he thinks an offshore bond is suitable for you

If there are details you don't understand ,then you must ask the IFA.It is always unwise to buy something you don't understand .These are not simple,off the shelve products. I am intending to open one next year and have had a vigorous Q&A with my IFA to understand the advantages and disadvantages of this type of wrapper

It sounds like the aim is to invest in comparatively low risk funds and you are correct that each fund will have a charge.

Vestra are discretionary managers and charge 1%.On top of this it would appear from your OP that the IFA charges 0.5% for initial and ongoing servicing and Canada Life 0.5% for the wrapper ( I don't know if this is above or below average for a bond provider).Again,these should be clearly set out in the IFA's report but,as Linton says,it would appear that the total annual fixed deductions are 2%

As Linton also says, your maths appear to be wrong.

Assuming $143k paid in after fee ,a 5% annual return after original fund charges,and 2% in annual fees to Vestra,IFA and Canada Life and no withdrawal of capital

After 10 years the $143k would grow to around $193k,including $50k of rolled up gross return and after charges of around $30k.please note these are just rough calcualtions and the IFA should model the cash flows for you.

You would be mad to buy an offshore investment bond if you don't understand how it works and if it is not fit for your purpose.Only you can decide that last point.