IFA fund selection query - offshore product

Mothman

[FONT=&quot]My question relates to an Canada Life International offshore bond ‘ Estate Preservation Account – Alpha version’ which my mother took out in 2000 and which she has asked me to look at for her.

[/FONT] [FONT=&quot]Would there likely be a sound reason why an IFA who is paid for ongoing advice would only have selected CLI funds from their ‘International Core’ fund range which have high AMC’s when the same underlying funds were available to the product from the CLI ‘International Open’ fund range but at much lower AMC’s.? The original four funds selected have largely remained unchanged over 17yrs other than a small change to one fund which looks as if [FONT=&quot]it came to an end[/FONT] and the money transferred to the replacement CLI fund. If the [FONT=&quot]underlying funds[FONT=&quot] were[/FONT][/FONT] available from the beginning then the IFA’s selection would appear to have had a substantive effect on the investment return, [FONT=&quot]unless of course there is a good reason which I'm not seeing[/FONT]?

[/FONT] [FONT=&quot] I appreciate this is a long shot and may only be answerable by any IFA’s here [FONT=&quot]with[/FONT] a knowledge of CL[FONT=&quot]I[/FONT] offshore products.[/FONT]

dunstonh

Would there likely be a sound reason why an IFA who is paid for ongoing advice would only have selected CLI funds from their ‘International Core’ fund range which have high AMC’s when the same underlying funds were available to the product from the CLI ‘International Open’ fund range but at much lower AMC’s.?

Normally, the core range is cheaper than the open range or broadly similar but without any initial charge. Remember that life funds AMC equates to the OCF on unit trusts. Not the AMC. You would also need to compare against the bundled share class of the UT fund and not the unbundled one as this was a 2000 plan. So, are you comparing like for like? Do you want to give an example of one of the funds you are looking at?

From memory (and it is a product that I cannot recall much about) I think there was a extra product charge if you went open architecture too.

Mothman

dunstonh wrote: »

Normally, the core range is cheaper than the open range or broadly similar but without any initial charge. Remember that life funds AMC equates to the OCF on unit trusts. Not the AMC. You would also need to compare against the bundled share class of the UT fund and not the unbundled one as this was a 2000 plan. So, are you comparing like for like? Do you want to give an example of one of the funds you are looking at?

From memory (and it is a product that I cannot recall much about) I think there was a extra product charge if you went open architecture too.

Your memory is spot on dunstonh, there was as an Alpha version & Omega version the latter being more open but may have been subject to extra taxation. The original Albany International (former name) literature suggests the Alpha version was open to "a range of pooled funds including Albany International funds, as well a wide range of unit trusts, investment trusts and other acceptable pooled funds" though sadly I don't have list of the originally available choices. According to the literature the product had an establishment charge of up to 2% per annum for the first 5yrs, plus an additional admin charge of £480 per annum, though I guess this admin charge may have increased by now.

Regarding the currently available fund choices these can be found at the following link though I cannot say from what date the 'International Open' range has been available for use, assuming it actualy is and CLI have not given me duff info. https://www.canadalife.co.uk/investment-choices/fund-centre.

Regarding the OCF point the CLI fund factsheets seem to suggest they are quoting AMC and not OCF

The Core range funds concerned are
CLI BGF Continental European Flexible (36%)
CLI BlackRock UK (24%)
CLI CF Canlife Global Bond (17%)
CLI Henderson Multi Manager Managed Portfolio (23%)

The underlying Henderson MM Managed fund is not available in the Intl Open range though there is the broadly similar MM Active fund, the Global Bond fund is the one that changed versions at some point. The original £100K investment currently stands at £225K after IFA fees.

Hope this info helps you ascetain if I am mistakenly comparing apples with pears.

dunstonh

Regarding the OCF point the CLI fund factsheets seem to suggest they are quoting AMC and not OCF

Life and pension funds dont have an OCF. However, the AMC on those is calculated using the same method as the OCF. So, you should compare life and pension fund AMCs with a unit trust OCF. Not a Unit Trust AMC.

Mothman

OK thanks, so for instance with the CLI Blackrock UK fund the 1.5% AMC should be compared to the 0.92% OCF of the underlying fund or is that wrong?

dunstonh

Mothman wrote: »

OK thanks, so for instance with the CLI Blackrock UK fund the 1.5% AMC should be compared to the 0.92% OCF of the underlying fund or is that wrong?

Almost.

0.92% is on the Class D version. This is the unbundled share class. unbundled share classes were not around in 2000. So, you should compare it with class A which has an OCF of 1.67%

Mothman

OK got it.

dunstonh thanks as always for taking the trouble to look at this. I'm sure the IFA will have good reason for choosing his mix of funds and for sticking with them and so I guess it is what it is. Thanks again