Cost of Maxi ISA

Sashcroft_2

Hello,

I just have a quick question for someone in the 'know'.

I have £6k that I would like to invest in a ISA for approx 10 years. I have been to see my advisor at Natwest and he has suggested a balanced fund.

Im quite confident that the ISA is the way to go, but I just wanted to check that what I am being charged is about average. The cost is 5% of the lump sum as a one off, then 1.56% of the total fund each year - is this about right?

Thanks for your help!
Steph

jem16

It's about right for a bank - far too dear.

If you know how to pick your own funds go to a fund supermarket like Hargreaves & Lansdown who will rebate all or most of that initial charge as well as some of the annual charge. You will also be able to pick far better funds than you will ever get from a bank.

If you don't know what you are doing get help from an IFA who will still be cheaper than the bank and will choose much better performing funds.

Read this thread for info;

http://forums.moneysavingexpert.com/showthread.html?t=416337

But please forget about a bank.

dunstonh

I have £6k that I would like to invest in a ISA for approx 10 years. I have been to see my advisor at Natwest and he has suggested a balanced fund.

bad bad and bad.

Im quite confident that the ISA is the way to go, but I just wanted to check that what I am being charged is about average. The cost is 5% of the lump sum as a one off, then 1.56% of the total fund each year - is this about right?

Its expensive. IFA typical maximum is 3%. IFA average is 1.8%. Your tied sales rep is 5%.

So, you are seeing a tied agent (first bad) who is charging you 5% (second bad) who is recommending you put all your money in one fund (third bad).

ISA is a good idea but it is wasted on a bank balanced managed fund. (note: Natwest balanced managed has been a bottom half performing fund since it launched 11 years ago). Indeed, out of the 58 balanced managed unit trusts available 11 years ago, the Natwest balanced managed fund is ranked 53.

The ISA is the tax wrapper but how you invest is critical. As an IFA, if was to say to you do you want to invest in a fund ranked 53 out of 58, which has never performed above average and has high charges, would you agree to invest that way?

The bank tied sales rep probably doesnt realise how bad the fund is and how poor the investment advice is. Not his/her fault as they only have around 15 funds to use and they are not authorised to recommend investment portfolios.

Under the FSA's proposals on retail advice, salesforce advisers will be downgraded to the lowest standard of advice. They may not even be able to use the term "adviser".

Ian_W

Adding to what Jem and dunstonh have said.
Single fund investing isn't recommended by the pros [like d/h] but if you want it because it's easier then I suggest you have a look at the balanced funds on the HL Wealth 150 list - HERE.
All 4 are much better performers than the NatWest one and you'll be paying a lot less, if anything at all, in up front charges.
With the markets as they are at the moment I'd pause long and hard before committing your £6K as a lump. The fact you have it available doesn't stop you from phasing the money in, say £500 a month, and if they settle and start to recover then put the rest in as a lump before the end of the tax year.

moneylover

Ian_W wrote: »

Adding to what Jem and dunstonh have said.
Single fund investing isn't recommended by the pros [like d/h] but if you want it because it's easier then I suggest you have a look at the balanced funds on the HL Wealth 150 list - HERE.

I am trying to learn as much as I can before committing to some funds within an ISA. I looked at the balanced funds on HL that you linked to- its the first time that I have looked at any of the tables. I see that there is quite a difference between buying price and selling price with several, is this just due to current market turmoil or is it quite usual? Does it depend on the size of the fund and how much they want to draw in new money? I notice that four of the funds have no spread at all. If you are paying more to buy than you would get from selling do you actually recoup part of this as a result of HL rebating most of the initial commission? You will all see I have a lot to learn still!

Ian_W

Wow, you went for a complex one there moneylover! Could I have one on sport instead?

It's nothing to do with the markets at the moment it's basically whether they're a Unit Trust or OEIC [open ended investment company]. UTs are dual priced OEICs are single priced.

You can find out more HERE but there is a lot of reading for the full explanation. It is a good site to bookmark though if you haven't already.