Understanding Investment Fees

tebbins

You don't need to keep your eye on the ball or "watch" anything. It's more a matter of getting the admin right at the start and not doing anything stupid like logging in every day, changing what you own, getting emotionally attached, selling in a crash etc.
You could try the IFA for a year, learn, grow your knowledge, see how that goes then consider leaving them (see if they have any withdrawal penalties etc.) if you feel confident and don't feel that the service is value for money.

eskbanker

longman27 said:

From the figures quoted here we could save £5000 a year in fees but would have to take responsibility for watching the investment. £5k is a lot of money but if we take our eye off the ball we could lose more or if we do lose through the advisor we would not have the false satisfaction of being able to 'blame' the professional.

Something to think about. Thanks for all the input.

The whole point of huge multi-asset funds like LifeStrategy is that they're geared up for 'fire and forget' investors who are looking for something easy and simple, so there really isn't anything significant involved in 'watching the investment'.  That's not to say that you shouldn't periodically review if it's still meeting your requirements, but it's unlikely to be as intimidating a prospect as you might imagine, and, as pointed out sometimes on here, professional advisers don't hold responsibility for investment performance as such anyway....

longman27

So here is a breakdown of fees quoted-

Initial charge 2.17%

On going charges-

Advisor Planning advice charge 0.75%

Standard Life WRAP 0.29%

SEI Growth Sterling Wealth Acc 1.38%

Vanguard Life Strategy 80% Equity A 0.26%

My CSE grade 1 Maths tells me that that is more than 1.86%. I'll check that with the advisor.

Missy79

I've recently set up a Vanguard account and it was very straightforward.
Assuming you are happy with the Lifestrategy 80 then the approx annual fees on £300000 would be:
Platform: 0.15% capped at £375 annually for your £300000
Fund: 0.22%, so £660 annually 
Total: £1035

If your quoted amounts above are correct they also seem to have added 0.04% to the fund charge

Alexland

longman27 said:

SEI Growth Sterling Wealth Acc 1.38%

Vanguard Life Strategy 80% Equity A 0.26%

These are 2 different funds so you don't add them up but apply them to whatever proportions of money they are allocated. For example if the advisor is saying the ongoing total is 1.86% then a 50% weighting to each fund would be an average fund cost of 0.82% plus the 0.75% and 0.29% ongoing = 1.86%

Missy79 said:

If your quoted amounts above are correct they also seem to have added 0.04% to the fund charge

They have included the 0.04% disclosed internal transaction costs for VLS80 see PDF
https://www.vanguardinvestor.co.uk/content/documents/legal/vanguard-full-fund-costs-and-charges.pdf

Albermarle

longman27 said:

So here is a breakdown of fees quoted-

Initial charge 2.17%

On going charges-

Advisor Planning advice charge 0.75%

Standard Life WRAP 0.29%

SEI Growth Sterling Wealth Acc 1.38%

Vanguard Life Strategy 80% Equity A 0.26%

My CSE grade 1 Maths tells me that that is more than 1.86%. I'll check that with the advisor.

If you take out the SEI growth fund and work on everything being in VLS80 , the total cost would be 1.3% . The high cost of the SEI Growth fund is pushing up the overall cost .

From the figures quoted here we could save £5000 a year in fees

Probably that would be a maximum saving . More realistically it would be in the £3K region +/- £1K

dunstonh

Advisor Planning advice charge 0.75%

Not unreasonable for £300k.  You could get 0.50% shopping around but that is fine.

Standard Life WRAP 0.29%

Not as good as Standard Life Elevate which would be 0.25% on standard terms.    Aviva would offer special terms on £300k that would see them probably in the 0.1x% range.        Aviva can be a bit of pain with service (during lockdowns, they turned off their phone lines) and their software is not as good as either Wrap or Elevate (all three use FNZ.  Indeed, Aviva use a newer version.  But Aviva lock down the configuration more and have virtually no audit trails on display).  I position Aviva as a budget option for those that place cost above service.  However, Elevate is just as good as Wrap.  So, I would question the platform use by asking why an IFA, who can use any platform, is choosing to use Wrap over Elevate when they do the same thing and Elevate is cheaper.

SEI Growth Sterling Wealth Acc 1.38%
Vanguard Life Strategy 80% Equity A 0.26%

A bit basic for £300k but if your knowledge and understanding are not strong and you are not an experienced investor then starting with simple options is sometimes the best way.

It could make the annual CGT allowance a bit more difficult as well.  The use of single sector funds in a GIA can give a bit more control compared to multi-asset but it depends on the tax wrappers being used.

If your quoted amounts above are correct they also seem to have added 0.04% to the fund chargeNo.  You quoted the charges incorrectly by only showing the platform charge and the OCF.  You ignored the TC.   The TC on VLS is 0.04%.
Advisers include all charges in their disclosures.  As do Vanguard when they issue their cost and charges disclosure.

Alexland

dunstonh said:

It could make the annual CGT allowance a bit more difficult as well.  The use of single sector funds in a GIA can give a bit more control compared to multi-asset but it depends on the tax wrappers being used.

Yes I am assuming as part of the service the advisor would be gradually uninvesting and transferring money each tax year out of the unwrapped GIA accounts to invest in the OP (and their wife's) S&S ISAs and pensions making good use of annual contribution allowances. In such circumstances I would want to hold at least seperate equity and bond funds in order to optimise the sequence of the assets being moved to reduce income tax and capital gains tax risk on the unwrapped accounts.

longman27

Alexland said:

longman27 said:

SEI Growth Sterling Wealth Acc 1.38%

Vanguard Life Strategy 80% Equity A 0.26%

These are 2 different funds so you don't add them up but apply them to whatever proportions of money they are allocated. For example if the advisor is saying the ongoing total is 1.86% then a 50% weighting to each fund would be an average fund cost of 0.82% plus the 0.75% and 0.29% ongoing = 1.86%

Missy79 said:

If your quoted amounts above are correct they also seem to have added 0.04% to the fund charge

They have included the 0.04% disclosed internal transaction costs for VLS80 see PDF
https://www.vanguardinvestor.co.uk/content/documents/legal/vanguard-full-fund-costs-and-charges.pdf

Thanks Alexland you are correct its 1.86%

Alexland

longman27 said:

Thanks Alexland you are correct its 1.86%

I wasn't expecting it to be a crude 50/50 allocation so created a quick excel spreadsheet to calculate the ratio for you. There's obviously some sophisticated portfolio construction going on with your advisor...