Prudential Investment Bond- advice please

dunstonh

If you know the name of the fund or bond you require,contact an execution only broker,who will not charge you any fee but will actually rebate you back a cash amount.

Execution only brokers are IFAs.

If they arent charging you a fee then how do they make their money?

So a £30k initial investment could with a 5% cashback be turned into a £31,500 investment.

A networked IFA could cashback more than that if they wanted to.

No brainer.

Unless you dont know what you want, buy the wrong thing and then find out you have no protection under the FOS as YOU chose the product and did it yourself.

alared

An execution only broker makes his money by getting a fee from the likes of the Pru.

If the fee for a £30k investment is 10% (£3,000)he rebates 5% (£1,500) to the investor and keeps £1,500 for himself.

Why anyone would invest the full £30k and then pay an IFA a fat fee on top of the one he`s already getting from the Pru is beyond me.

Talk about have Your Cake and Eat It

dunstonh

Talk about have Your Cake and Eat It

Talk about getting your figures wrong.

An execution only broker makes his money by getting a fee from the likes of the Pru.

Actually you can pay a fee or retain a smaller amount of the commission that is payable. That is up to the IFA.

If the fee for a £30k investment is 10% (£3,000)he rebates 5% (£1,500) to the investor and keeps £1,500 for himself.

10%???? Not a chance. 6% is closer to the mark although some IFAs will get less that that depending on what terms they have negotiated.

Why anyone would invest the full £30k and then pay an IFA a fat fee on top of the one he`s already getting from the Pru is beyond me.

They dont.

jem16

alared wrote: »

An execution only broker makes his money by getting a fee from the likes of the Pru.

You seem to be missing the point.

An execution only broker is exactly the same as an execution only IFA.

If the fee for a £30k investment is 10% (£3,000)he rebates 5% (£1,500) to the investor and keeps £1,500 for himself.

Exactly the same as an IFA can do.

In fact the IFA could belong to a network that gets a fee of 15%, rebate 7.5%(£2250) and still keep 7.5% (£2250) for himself. So you are £750 better off and the IFA gets more than the discount broker. ( Figures of course are completely made up - as is the 10%)

Why anyone would invest the full £30k and then pay an IFA a fat fee on top of the one he`s already getting from the Pru is beyond me.

The main reason is to get the advice on exactly how and where to invest the £30k. You also have the protection as dunstonh already mentioned.

Talk about have Your Cake and Eat It

So according to you, it would be better going to the discount broker(aka IFA) who only makes £1500 than the IFA who would make £2250? Even though your investment through the discount broker is now worth £31,500 and through the IFA it is now worth £32,250?

So who has the better slice of cake?

Newly_retired

It IS a Pru WP investment bond I've been recommended with the option of a 5 yr capital guarantee, which I reckon I would take.
According to the Key Features brochure the charges are low- Annual Management Charge is 1.25% a yr ( decreasing to 1% after yr 10 )+ an establishment charge of 0.25% a yr for first 5 years.
There is a 3 yr early cash in option which costs an extra 1%. It's normally 5 yrs. There would be other charges for cashing in during the first 5 yrs, but I would be expecting to keep this fund longer.

dunstonh

oldmanof_the_sea wrote: »

Also brand new to this forum so hope I'm not breaking any rules.
I have similar problem with trusting my ifa and as such I see that I should sack him but not sure how to go about it or replace him. Do I need to see a solicitor?

Most solicitors dont get involved with financial advice nowadays and are not FSA authorised. You just need to appoint a new IFA.

dunstonh

If you are in poor health and have financial dependents then a bond could be a very good option given its lack of up front charges, increased allocation and extra bit on death. It is possible with some to have a capital guarantee as well.

The commission percentages you mention are high (average commission on collectives is 1.8% plus 0.5% p.a. with typical maximum closer to 3% plus 0.5%). Fee option would be cheaper as well.

Obviously its impossible for anyone to give advice to you based on a little text on a couple of forums posts. There are advantages and disadvantages to investments and cash savings and it depends on what you want from your money as to what will be best.

dunstonh

and the one or two forrays I've made outwith of this (PEPs etc) have yielded me little more than cash on the High Street, so don't have a lot faith anymore.

To put that in context, I have average 19.8% p.a. since 1995. Not saying you would go with my risk profile though but just wanted to show that quality often counts.

The main thing that puts me off the bond is that it looks like it will take me about a year and a half to get back to my original investment, whereas on the High Street, I would expect to be up by 5.5k even paying the tax. At age 66 I think this is a factor.

Depends on the investment though. Remember that commission does not necessarily equal a fee. Also note the cost of the adviser will vary.

At the moment, there are some attractive yields available at the lower risk end of the investments and a bit of diversification, small chunk of yielding stockmarket funds and a chunk of cash could yield some very nice returns. You say you need about 18 months to return you to the position before you invest. To put in context, those arranged by me in last two weeks have already covered the advice charge. So, dont rule out investing as an option. You may just have to get a second opinion from another adviser. Get the yellow pages out and speak to another IFA to see how things compare.

This thread covers the prudential investment bond but whilst I am not a fan of all-in-one investments, there are a lot of merits to the newer Pru fund option which has no initial charges and that may be worth you investigating as an option.

dunstonh

The bond grows after it has been taxed at source giving you no further liability (unless you go into higher rate). The Pru fund tends to float around 6.5% net after tax but the rate of return is not guaranteed.

If you draw more than 5% a year it creates a chargeable gain and you would be subject to tax only if the gain takes you into higher rate. Not if you remain a basic rate taxpayer.

EdInvestor

oldmanof_the_sea wrote: »

My Ifa wanted to put it in an Aegon offshore Wealth management Portfolio with the full amount invested in Natwest Int'l Base Rate Tracker Prem account currently paying 6.1%.

Is this a cash fund?

If so what would be the point in using a wrapper which is subject to 20% internal corporation tax and additional charges on top?

An ordinary BS account has no charges, thus the return will be higher if the interest rate is the same.

N&SI index linked certs may also be worth looking at for a tax free return - though rates are not as competitive as they were some pwople like the safety aspect especially if there are large sums involved.