OFFSHORE BOND - Questions!!!

[Deleted User]

Friends Provident OFFSHORE BOND -  Investment managed by Wealth Management company

Afternoon all

7 years ago, on the advise of an IFA, my father (a basic tax payer) opened an Offshore Bond with Friends Provident.  My dad was 81 years, had more than sufficient income (SSP & mix of private employee pensions) to cover all his (modest) outgoings comfortably.  At the time, Dad & I had just recovered from having to fight the NHS for Mum to receive CHC funding (which she did, RIP).  The actions of the NHS/CHC nurse assessors were a disgrace (misrepresentation of the facts,etc) but that is another story!!

We were maybe still raw from the CHC fight, in hindsight we probaby focussed our discussions with the IFA on protection of assets too much rather than tax planning.  An Offshore Bond was proposed as a product that at the time (2014) would not be included in financial assessment of assets if my Dad needed care, I assum it still is.  I am delighted to day that Dad lives with us, is still very well & has no care support needs as of yet).

The Offshore Bond was funded by Dad cashing in his Cash ISAs and topped up with some spare cash.  £6k, ie 3% fees upfront were taken by Wealth Management company.

In 7.5 years the Bond has grown by c36% which I calculate as an average annual increase of 4.9%


QUESTIONS:

The investment within the bond is managed by AFH Wealth Management who charge 1% annual fees.  I have been less than impressed with thier customer service (late reports, multiple changes of IFA, avg perfprmance) and so Dad & I are considering self managing the investment............before anyone gets excited, we know our limits and were thinking Vanguard Life Strategy 60% and or HSBC Global Strategy  and or L&G Multi Index.  

Q1 - Is self management of Investments via an onlooine platform within an offshore bond even possible?
Q2 - How does one self manage:  Would we open a platform such as IInvestor and manage the investments in the Offshore Bond in the same way I manage my SIPP & S/S ISA?
Q3 - Do I contact Friends Provident or Pershing?
Q4 - I need to do a full fees/charges comparison ie Is the 1% AFH annual fees covering the Pershing custodianship of the Offshore Bond and if so I need to add that to the Platform Fee

Thanks as always

blenz101

Q1 - Not sure really what you are looking to do here.  If you want to switch to something more appropriate (e.g. you mention Vanguard/HSBC) and with lower fees via an investment platform you will need to sell.  Even though the bond is 'offshore' you will still be potentially liable for tax depending on the gain, 20% at the basic rate but note the sale could push your dad into a higher band.  You will need to explore this, hopefully AFH can guide as your existing advisors.

Q2 - Yes, you can open an account with an online platform but I can't really see any scenario where you can transfer in an Offshore bond sold by a financial advisor.  You would need to purchase retail funds and those are indeed managed the same way you do your SIPP/ISA.

Q3 - You should contact AFH, you are sort of on their 'platform'.  They will act as your broker to sell.

Q4 - It is almost a certainty that the AFH fee is independent of all the other fees covering the cost of your actual investment.  That is just their fee for effectively being a platform.

I would also add the product sold seems completely inappropriate and personally I would be considering a miss selling claim but obviously don't know the full circumstances.

dunstonh

Q3 - You should contact AFH, you are sort of on their 'platform'.  They will act as your broker to sell.

From what i read, AFH are the advisers and FPI is the provider.

Q4 - It is almost a certainty that the AFH fee is independent of all the other fees covering the cost of your actual investment.  That is just their fee for effectively being a platform.

I suspect a DFM is being used (Pershing?).     So, this would have FPI, AFH, Pershing and the investment funds as the charges.

I would also add the product sold seems completely inappropriate and personally I would be considering a miss selling claim but obviously don't know the full circumstances.

We don't know enough to say.      The OP hasn't mentioned if it is in trust or not.  I suspect it is.  A lot of these trusts designed to protect assets do tick the suitability box even though many of them are largely unnecessary at the end of the day.     Without knowing what trust is being used, it is pretty impossible to make any judgement. 

maxsteam

Friends Provident used to be a "friendly society" which often meant that investors were tied into savings plans with high charges if you stayed the term and exorbitant charges if you withdrew early. You need to check the status of the investment and withdrawal charges before making any decision. The total charges will probably be more than 1% p.a. as Friends Provident will take a cut, some of which is passed back to the "adviser".

dunstonh

Friends Provident used to be a "friendly society" which often meant that investors were tied into savings plans with high charges if you stayed the term and exorbitant charges if you withdrew early.

Friends Provident International was originally Royal & Sun Alliance International but purchased in 2003, two years after, new parent company, Friends Provident was demutualised.      Royal & Sun Alliance International/ FPI has never sold any friendly society products and has never been a friendly society.

 You need to check the status of the investment and withdrawal charges before making any decision. 

It doesn't have any withdrawal charges.  

The total charges will probably be more than 1% p.a. as Friends Provident will take a cut, some of which is passed back to the "adviser".

Not on a 2014 product.

Malthusian

An Offshore Bond was proposed as a product that at the time (2014) would not be included in financial assessment of assets if my Dad needed care, I assum it still is.

Not if it was taken out with the aim of avoiding care fees, as that would be deliberate deprivation.

If it was taken out for different reasons long before any need for care could be anticipated, it might be disregarded in the event of an assessment for care costs. Nobody can say for sure. Whether Dad would want to be chucked into Overmydeadbody Grove by the council so he could preserve his offshore bond is another question. And it may be irrelevant if he had house sale proceeds or other assets which would be used to pay his living costs if he eventually needed care.

Offshore bonds are usually tax inefficient compared to ISAs (even unwrapped funds) as all the income and gains roll up within the bond and are taxed as income on sale, death of the last life assured or another chargeable event. Unless the potential to be disregarded for care costs is all-important (if it even applies) he may wish to consider whether he wants to continue investing via an offshore bond while the tax liability continues to mount.