Typical Adviser Set-Up Charges and Annual Fund Charges?

Tojo_Ralph

I had a peer ask me a question with regards investing in PruFund with-profits investments funds. They are initially looking at a £200k to £250k investment for 3 to 6 years and perhaps a similar second investment. They asked me what to expect with regards to the Advisers Set Up Charge (%) and the Total Annual Fund Charge (%).

In all honesty, I had no idea with regards either, but I said I knew a place to ask. Any ideas folks? I assume the Advisors charge as a percentage should reflect the sum of money being invested? So on a £200k to £250k investment it’s going to be a lower percentage than £10,000? …. And on two £200k-£250k investments it should be lower still? Any ideas on both questions?

dunstonh

They are initially looking at a £200k to £250k investment for 3 to 6 years

It is an investment with a recommended minimum term of 5 years.

They asked me what to expect with regards to the Advisers Set Up Charge (%) and the Total Annual Fund Charge (%).

Anything from around £1000 plus for initial.

I assume the Advisors charge as a percentage should reflect the sum of money being invested?

Percentage based is one model. Hourly rates and fixed amounts are others.

And on two £200k-£250k investments it should be lower still?

Depends on whether you have ongoing servicing or not and the business model of the adviser. Many advisers will do top ups free of charge when you invest above a certain amount when you use their ongoing servicing. If you dont use their ongoing servicing, you will "typically" pay for each amount as if its new business each time. Otherwise you would be getting it for free and that isnt going to happen.

Tojo_Ralph

dunstonh wrote: »

It is an investment with a recommended minimum term of 5 years.

Thanks, I'll suggest they read the paperwork and query why the investment was suggested based on 3 years.

dunstonh wrote: »

Anything from around £1000 plus for initial. Percentage based is one model. Hourly rates and fixed amounts are others.

Having asked, the set up fee is quoted as a % of £200k-£250k and is in fact MULTIPLES of £1000's and thus appears to be over the top. So thanks.

dunstonh wrote: »

Depends on whether you have ongoing servicing or not and the business model of the adviser. Many advisers will do top ups free of charge when you invest above a certain amount when you use their ongoing servicing. If you dont use their ongoing servicing, you will "typically" pay for each amount as if its new business each time. Otherwise you would be getting it for free and that isnt going to happen.

The investment/s were to be invested and forgotten until required, without any top ups, so no on-going work. In addition I have been advised that the Total Annual Fund Charge quoted is 1.30% on £200K-£250K. Using Google that seems OTT also?

When I say possibly two investments, it would be two £200-250k investments with different terms, which have identical set up and annual fees, so multiples of £1000's to set up each investment and 1.30% a year.

dunstonh

The investment/s were to be invested and forgotten until required, without any top ups, so no on-going work.

What about bed & ISA?

In addition I have been advised that the Total Annual Fund Charge quoted is 1.30% on £200K-£250K. Using Google that seems OTT also?

It is about right for a fund with protections. Dont mix this up with cheaper unprotected funds. Protections cost money.

When I say possibly two investments, it would be two £200-250k investments with different terms, which have identical set up and annual fees, so multiples of £1000's to set up each investment and 1.30% a year.

Which pru fund product/fund is being looked at? The terms vary.

Why does the money need to be accessed in 3-6 years? Most modern day investments are open ended rather than fixed term. So, is this really being invested for an open ended or longer term need than 3-6 years?

Tojo_Ralph

dunstonh wrote: »

What about bed & ISA?

A simple 3 year fixed rate may be the simplest, but don't know how you could get such a large investment into a tax free savings account.

dunstonh wrote: »

Which pru fund product/fund is being looked at? The terms vary.

It says Inv Plan Mark 3. It just seems that a few thousand £ to set up EACH investment seems a large fee to me.

dunstonh wrote: »

Why does the money need to be accessed in 3-6 years? Most modern day investments are open ended rather than fixed term.

Fixed term 3 years and 6 years respectively for the two investments and all apparently to do with family.

dunstonh

A simple 3 year fixed rate may be the simplest, but don't know how you could get such a large investment into a tax free savings account.

£20k per year per couple soon adds up over the years.

It says Inv Plan Mark 3. It just seems that a few thousand £ to set up EACH investment seems a large fee to me.

I wish that was what it only was. That is the easy bit.

Fixed term 3 years and 6 years respectively for the two investments and all apparently to do with family.

Its unusual for people to have such a fixed requirement on such a large amount. A lot of people still think of their money in 3-5 year blocks and then think that every 5 years they they have to buy another product and then another one. That is not the case most of the time. Which is why I mentioned it.

Tojo_Ralph

Tojo_Ralph wrote: »

It says Inv Plan Mark 3. It just seems that a few thousand £ to set up EACH investment seems a large fee to me.:)

dunstonh wrote: »

I wish that was what it only was. That is the easy bit.

As your response appears to be in relation to the workload associated with setting up the two off circa £225K investments, bearing in mind there is a 1.30% annual charge and to bring us back to the original question.

Would a set up fee somewhere in the region of £9,000 to set up two off circa £225k funds be in line with "typical adviser set up fees"?

Anyone?

jimjames

dunstonh wrote: »

£20k per year per couple soon adds up over the years.

Do you mean per person? It would be £40k per couple now with a £20k annual allowance?

dunstonh

Would a set up fee somewhere in the region of £9,000 to set up two off circa £225k funds be in line with "typical adviser set up fees"?

Nowhere near typical. Certainly there are some out there that would charge that or even more but it would be very easy to get that to £1500-£2500.

Tojo_Ralph

Tojo_Ralph wrote: »

Would a set up fee somewhere in the region of £9,000 to set up two off circa £225k funds be in line with "typical adviser set up fees"?

dunstonh wrote: »

Nowhere near typical. Certainly there are some out there that would charge that or even more but it would be very easy to get that to £1500-£2500.

Thanks, very helpful, especially coupled with the proposed investments. The Pru mirror your comments with regards to suitability of investment period.