Stocks & Shares ISA Management Charges

Out_of_Town

Hi all.
I’ve recently been given advice from an IFA regarding investing a sum of £137,000 from my cash ISA into a Stocks & Shares ISA. I’m happy enough with the advice given and my risk factor taken into consideration but I think the charges involved seem a bit high and I’d like the opinion of you guys on it, if that’s ok.

Upfront charge of 1.0% and an ongoing annual management charge of 1.0%. There’s also an ongoing charge from the platform of 0.63%. This equates to around £186 per month (if my sums are correct) as the annual charges are spread over 12 months for both parties.

Does this seem reasonable ?

dunstonh

Upfront charge of 1.0% and an ongoing annual management charge of 1.0%.

1% upfront is low.  1% ongoing is ballpark for a relatively small amount (in IFA terms).

There’s also an ongoing charge from the platform of 0.63%. 

That's high but I suspect you mean platform and fund charges.  I cant think of any platform that charges 0.63% but if you add in funds, it would be in that range.

Does this seem reasonable ?

For the amount involved, yes.

sevenhills

I take it you agreed to the IFA terms before you met. I understand there is a yearly limit of £20,000 that you can put into an ISA. So what happens to the rest?

Out_of_Town

Thanks for your reply.
As a newbie to S & S ISA’s I just can’t get my head around a monthly charge (£180ish) as high as that.  . .would need some fund performance to make this worthwhile I think.

Linton

If, as seems very likely, the 0.63% includes fund manager charges, then that bit isnt something that is added to your bill.  It is just last year's  amount of money that the fund manager needed to take from the overall fund to pay his staff etc.  It is already included in the fund's published performance figures.

JohnWinder

I don't know how to tell if it's reasonable. I'm not sure being 'average' of even below average necessarily makes costs reasonable.

What's reasonable would seem to be charging for the amount of work, based on overheads and a decent income, or something of that ilk. If it's a lot of work the charge should be higher. Charging a % rate seems flawed logic to me, unless you adjust the rate for the £ under consideration, in which case you're moving towards charging by the amount of work.

It seems there's some cross-subsidy with a % charge, the richer client subsidising the costs of the poorer, which might have a good feel to it; but it also somewhat conceals the reality of the fee, or so the questioner suggests by calculating the £ cost for us.

I can't see that a portfolio of one mixed global stock/bond tracker needs the same ongoing amount of work as having a dozen different funds half of which are turned over ever 5 or 10 years. Of course the office costs wouldn't vary much.

silvermum

sevenhills said:

I take it you agreed to the IFA terms before you met. I understand there is a yearly limit of £20,000 that you can put into an ISA. So what happens to the rest?

If it's already in a CASH ISA then it is a transfer and not "new" ISA money.

silvermum

For a sum of £137,000 I'd suggest learning how to manage it yourself on a DIY platform such as Interactive Investor. My annual platform fees for a S&S ISA of a similar amount are £120 with a cost of 0.22% for a global index tracker fund.

dunstonh

As a newbie to S & S ISA’s I just can’t get my head around a monthly charge (£180ish) as high as that.  . .would need some fund performance to make this worthwhile I think.

The charges on your savings account are higher.  The difference is that with investments, the charges are explicit.   Also, part of the charge will include Transaction charges and incidental  charges.  DIY investors suffer the exact same charges but disregard them as they come from a flawed EU directive.

It seems there's some cross-subsidy with a % charge, the richer client subsidising the costs of the poorer, which might have a good feel to it; but it also somewhat conceals the reality of the fee, or so the questioner suggests by calculating the £ cost for us.

It certainly used to but not so much nowadays.  That is why smaller investors now tend to pay around 0.75% to 1.0% and larger ones get 0.25% to 0.5%.