Investment Fees and Charges

WhenIGrowUp...

Hi All,
A question for those of you with managed investments - your thoughts would be appreciated.
I've been quoted total annual fees for a managed investment of 2.3% - this is for a substantial (to me!) sum which sits outside my Vanguard S&S ISA. It will be invested for 10+ years so fees and inflation over the long term will add up to a substantial hit on any gains.
I was planning on running the managed investment alongside my ISA and comparing as I go until I feel more confident with the DIY route - at that cost though maybe I'm better just opening another investment account with Vanguard right now and sticking it all in LS or Global All Cap?
Your thoughts on the fees quoted would be received gratefully as I have little in the way of comparison.
Thanks.

eskbanker

You'll need to share more detail about the sum involved, who's doing the managing, what the products and/or services actually are, etc....

MaxiRobriguez

It depends what you mean by "managed investment" - if you want to pay someone to assess your needs, select investments and continue to manage your portfolio for you then it's probably about right depending on the capital you have.

If by "managed investment" you mean an actively managed fund that you have already found, then it's expensive.

At this point the majority of S&I posters are likely to tell you, as a novice, to "just pick a cheap globlal index tracker and be done with it" - these can cost as low in the region of 0.1 to 0.2% and will probably end delivering the same sort of returns that your 2.3% managed investment will get you.

Another_Saver

What is the investment?
How much is it asking for?
What kind of account is it in, taxable, ISA, SIPP, something else?
What is it going to invest your money into?
What returns is it saying it will achieve and how does it expect to acheive those returns?
2.3% sounds like a lot for anything.

dunstonh

I've been quoted total annual fees for a managed investment of 2.3% - this is for a substantial (to me!) sum which sits outside my Vanguard S&S ISA

That is high for an advised solution.    Getting closer to half that as the ballpark should be the target (the more you have, the more the percentage tends to drop).

An advised solution will always be more expensive than a non-advised solution using the same investments.   

WhenIGrowUp...

Thanks for your replies, to provide a bit more info:

Another_Saver said:

What is the investment? Inheritance
How much is it asking for? It will be an initial investment of around 650k.
What kind of account is it in, taxable, ISA, SIPP, something else? An investment bond has been advised. This is something I need to research more, I only have a basic understanding at best.
What is it going to invest your money into? To be confirmed, if I proceed I will have to undertake a risk assessment and an investment manager will make a proposal.
What returns is it saying it will achieve and how does it expect to acheive those returns? TBC - I don't have this information yet.
2.3% sounds like a lot for anything. My initial reaction too - especially over the long term. The charges do include an annual fee for 'wealth management' which I presume means someone will gather information about my current financial position, pension etc. if I wish to avail of the service. I feel confident in my other arrangements though, it's just this part I am unsure of - probably because of the sum involved. I want to get it right.

csgohan4

have you considered saving some money and investing yourself after research. 

However outside a tax wrapper, you will be subject to significant taxes on selling

AnotherJoe

2.3% is much higher than it sounds because a fairly cautious investment might return about 5% long term after inflation, which means they are looking at sucking up half your annual growth.

You appear to have encountered some sharks, swim away quickl

As MaxiR said "just pick a cheap global index tracker and be done with it - these can cost as low in the region of 0.1 to 0.2% and will probably end delivering the same sort of returns that your 2.3% managed investment will get you."

And hes not wrong because for it to be otherwise, this scheme would have to do double the performance of the world economy which is very unlikely.

Now, TBF maybe there are some tax advantages to this bond*, but outside that, give it a miss. Or second best to DIY, find an IFA who will put you in some investments at your risk level and  total charges will be around 1% I think.

* a word with a million uses

Albermarle

For this level of money an IFA will charge an initial fee of a few grand and an ongoing fee of 0.5%.
An investment platform might cost 0.2% max and an actively managed fund from 0.6% to 1.2 % .
So say 1.5% altogether , or if the investments are mainly low cost passive funds more like 1 % 
Or you could DIY for say 0.2% to 0.8% but £650K is quite a large fund to handle if you have little experience.

WhenIGrowUp...

So many thanks to you all for your help, I am finding it difficult to speak to people in real life as I don't want to disclose the inheritance to my friends. I wish the fantastic person who left me this money had told me about it in advance, I would have loved to discuss all of this with him, I know he would have had some sensible advice.

Another_Saver

WhenIGrowUp... said:

Thanks for your replies, to provide a bit more info:

Another_Saver said:

What is the investment? Inheritance
How much is it asking for? It will be an initial investment of around 650k.
What kind of account is it in, taxable, ISA, SIPP, something else? An investment bond has been advised. This is something I need to research more, I only have a basic understanding at best.
What is it going to invest your money into? To be confirmed, if I proceed I will have to undertake a risk assessment and an investment manager will make a proposal.
What returns is it saying it will achieve and how does it expect to acheive those returns? TBC - I don't have this information yet.
2.3% sounds like a lot for anything. My initial reaction too - especially over the long term. The charges do include an annual fee for 'wealth management' which I presume means someone will gather information about my current financial position, pension etc. if I wish to avail of the service. I feel confident in my other arrangements though, it's just this part I am unsure of - probably because of the sum involved. I want to get it right.

As others have said, you could get a far better deal from an IFA offering a normal wealth management service. The problem with that amount of money is you will be paying tax no matter where you put it (except for under the mattress or 0%/close to 0% bank accounts) so one advantage of an IFA is that they may take care of this for you (it's not that difficult just an annual bit of admin really).

Personally I would max out my premium bonds allowance with £50k, and invest the rest in a general taxable iWeb account, then max out as much of my ISA and pension allowance every year as possible. Sticking it all in vanguard FTSE global all cap seems fine to me (I have my own, different portfolio featuring that fund,  that I would replicate but it's your money and a perfectly sound fund for long term investing).

Don't forget to spend and enjoy some, and consider a more balanced multi-asset fund like VLS 80 or 60 if you're intending to take money out in within a decade.