Is this a reasonable fee for a financial advisor

pizza_lord

Ok so I have been talking to a financial advisor about what to do a large sum of money

He advised the old mutual plc and a product called [FONT=&quot]Executive Bond

I have looked over the details and it looks attractive

Fees are as follows

Financial advisor charges 96 pounds per quarter admin fee

dealing cost 15 pounds (buying and selling shares)

Early redemption charge 8% declining 1% per year

And old mutual charge 1% pa on initial investment. In other words if I invest 50,000 they charge 500 pounds

6 to 8% return per year is what is predicted (after fees)

Thoughts?
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jamesd

Which country to you live in? Why was this type of bond recommended to you? There usually has to be some specific reason why it makes sense instead of the usual ISA route. 6-8% a year isn't particularly impressive.

pizza_lord

I said that 6-8% is easily do-able

Last 3 years it achieved

5%
14%
and 14.5%

Which averages out at better than 6-8%

I am not UK resident so ISAs are out and also the amount of money is large and ISAs are capped are they not?

jamesd

The tax treatment needs to be considered based on your country of residence. Unless it's providing you some tax advantage it's unlikely to be worth buying compared to say ETFs in a normal trading account.

What I'd probably do instead is use P2P to get 10-12% a year from secured lending via platforms like Ablrate, MoneyThing and SavingStream that I think all accept non-UK residents. Still, with close to a million to invest it would be good to have a substantial amount not in those.

Best to always mention your country of tax residence because it'll affect the answers that you get.

macca1974

the £96 per quarter admin fee isn't what you are paying your financial adviser, it is the standard administration fee for the OMI Executive Investment Bond. These products are designed for the international market and come packed with lots of commission to the adviser. If there is an 8% exit penalty, the financial adviser company will be making circa 7%-8% commission out of the deal. So you'd need to judge whether that is appropriate for the amount of advice that is being given and the size of the investment although in the UK it would be considered massive.

Also, the EIB is OMI's "open architecture" bond which allows all sorts of wild and wacky investments. Just out of interest, where are they suggesting that you be invested??

pizza_lord

I am a digital nomad, constantly travelling and not tax resident anywhere

I currently am in SE Asia

pizza_lord

I didn't say there was an 8% exit penalty

I said there was an 8% penalty for closing the account in year one declining by 1% every year

Even during the first 8 years you can take out upto 75% of the money with no penalty at all.

macca1974

you can take the withdrawal of up to 75% without penalty, but the ongoing 1% charge will still be based on the higher of the initial investment and the current value (so if you did withdraw 75% then your annual charge would be 4% pa of the remaining value).

These are pretty expensive products with significant adviser remuneration built in.

pizza_lord

@macca, what would you do instead?

dunstonh

This is a UK board and discussions are relevant to the UK. In the UK, advisers are fee based. There is no commission. The product you are talking about is not UK based and is a commission payer. Most Asian markets have regulation that ranges from non-existent to the level the UK had in the 80s. The distribution methods are similar to 80s methods in the UK. (i.e. sales, not advice and very little comeback if its wrong).

That type of product is niche for the UK consumer. It fits a niche range of consumers. They are frequently flogged overseas though (and there can be good reason if you plan to return to the UK). However, if we look at the level of disclosure, you thread title asks about adviser fees. Yet your "adviser" (assuming they are a real adviser and not a sales rep using the adviser tag) isnt charging fees. They are receiving commission. They dont appear to have disclosed that to you. It may not be a requirement in their jurisdiction but this type of product has high commissions.

macca1974

I used to work for a competitor of OMI who operated in a very similar fashion (which is why I know a bit about this stuff). The problem that you have, is that a bond is probably suitable based on your situation and it is pretty much the industry standard to take the full commission (and therefore offer the contracts with these high charges). I would probably see if you can negotiate with your adviser to drive down the charges (and BTW OMI do allow you to reduce charges if you take less commission) or see if you can find via Goggle or recommendation a firm that is more transparent with their charging structures. There are a few out there that operate in a more "UK Style" fashion, but you'd need to find one that you got on with.

It is difficult though as you can't access these products directly and do need to go via an adviser.