IFA set up fees for ISA

mettlemickey

Hello,

I’ve recently discussed setting up a stocks and shares ISA with my IFA. This is to complement my work pension. He’s found an investment plan with Aviva that I’m happy with. He says the setup fees are £300 one off fee then 0.5% per annum for ongoing management. 

As this is my first time doing such a thing I’d like to know if these fees sound reasonable and in line with common norms before I proceed. 

Any feedback would be much appreciated, thank you very much. 

MM

gm0

It competes with "free" to setup a stocks and shares ISA DIY. It is a price for supporting you with doing it. It is agreeable or not.  It takes less than 1hour on the web to setup an S&S ISA and some checking later that things happened as you wanted.  

You can open a Stocks and Shares ISA for free with no setup fee and no ongoing charge.  You can do it with a platform with massive choice of investments. Or with a simpler one with an adequate short list of risk tiered options and funds - such as the Vanguard Investor one.  Any platform. Aviva or Vanguard or any other will have a platform fee to be on it. And funds have fund management costs.  Advice is usually on top if desired. 

The idea of paying 1.5% of the initial contribution (£300/20k) if going to the limit. And 0.5% to hold such a widely available direct to consumer product is something many here would find disagreeable and an odd use of £400 in year 1. 
It's not good value vs free as a simple financial product.  But it is good value in context of you finding the adviser support to your broader financial affairs essential or very helpful.  In which case the 0.5% ongoing price is not unusual in the market and if that's what you want.  It's becomes good value to you.

Many of the benefits of financial advice can be obtained by working with an IFA on your pension.  It is not *necessary* to let them take a drink on all of your money.  They don't take a 0.5% drink on the equity in your house after any mortgage. So why the ISA
They will of course argue that it is impossible to advise you properly if they don't know what you have.  And that much is true.  But it is not the same thing as them *needing* to have all of it as assets under their management.  Subject to ongoing fees.

A packaged multi-asset at Vanguard would be 0.15% platform fee. 0.22% fund fee (for Vanguard LifeStrategy 60 the middle of the road one stop shop fund).  No setup. No management - so 0.37% all in. (It can be done even cheaper elsewhere and there are cheaper funds but this is a deliberately simple example of a very simple DIY product.

The adviser introduced Aviva equivalent will cost whatever it does (which is on your paperwork) for the Aviva product/platform fee and the fund fee. And then 0.5% and the £300 initial charge (I assume 1.5% of 20,000).

It is clearly in your advisers interest that you place all your investible assets under his or her management.  0.5% on the bigger number as it grows and you add to it.  And the 1.5% drink on the way in. 

Clearly this also depends upon what contract you have already signed with them for existing support to your pension and other financial advice needs.

The price is either a price you are happy to pay for a service received with the ISA also in "scope" with the adviser.  Or it isn't.

There is a fairly remote possibility that this 0.5% is an all in figure i.e. includes aviva product/platform and so the comparison is less unfavourable as the adviser is taking less than 0.5% pa on these assets under management.  Check your paperwork most carefully to understand risk level, chosen investment and total costs across all the layers

mettlemickey

gm0 said:

It competes with "free" to setup a stocks and shares ISA DIY. It is a price for supporting you with doing it. It is agreeable or not.  It takes less than 1hour on the web to setup an S&S ISA and some checking later that things happened as you wanted.  

You can open a Stocks and Shares ISA for free with no setup fee and no ongoing charge.  You can do it with a platform with massive choice of investments. Or with a simpler one with an adequate short list of risk tiered options and funds - such as the Vanguard Investor one.  Any platform. Aviva or Vanguard or any other will have a platform fee to be on it. And funds have fund management costs.  Advice is usually on top if desired. 

The idea of paying 1.5% of the initial contribution (£300/20k) if going to the limit. And 0.5% to hold such a widely available direct to consumer product is something many here would find disagreeable and an odd use of £400 in year 1. 
It's not good value vs free as a simple financial product.  But it is good value in context of you finding the adviser support to your broader financial affairs essential or very helpful.  In which case the 0.5% ongoing price is not unusual in the market and if that's what you want.  It's becomes good value to you.

Many of the benefits of financial advice can be obtained by working with an IFA on your pension.  It is not *necessary* to let them take a drink on all of your money.  They don't take a 0.5% drink on the equity in your house after any mortgage. So why the ISA
They will of course argue that it is impossible to advise you properly if they don't know what you have.  And that much is true.  But it is not the same thing as them *needing* to have all of it as assets under their management.  Subject to ongoing fees.

A packaged multi-asset at Vanguard would be 0.15% platform fee. 0.22% fund fee (for Vanguard LifeStrategy 60 the middle of the road one stop shop fund).  No setup. No management - so 0.37% all in. (It can be done even cheaper elsewhere and there are cheaper funds but this is a deliberately simple example of a very simple DIY product.

The adviser introduced Aviva equivalent will cost whatever it does (which is on your paperwork) for the Aviva product/platform fee and the fund fee. And then 0.5% and the £300 initial charge (I assume 1.5% of 20,000).

It is clearly in your advisers interest that you place all your investible assets under his or her management.  0.5% on the bigger number as it grows and you add to it.  And the 1.5% drink on the way in. 

Clearly this also depends upon what contract you have already signed with them for existing support to your pension and other financial advice needs.

The price is either a price you are happy to pay for a service received with the ISA also in "scope" with the adviser.  Or it isn't.

There is a fairly remote possibility that this 0.5% is an all in figure i.e. includes aviva product/platform and so the comparison is less unfavourable as the adviser is taking less than 0.5% pa on these assets under management.  Check your paperwork most carefully to understand risk level, chosen investment and total costs across all the layers

Many thanks for the detailed reply. Very helpful. I will check if the 0.5% covers platform costs as well. I’m not putting £20k in though, just £100 a month, so in that respect perhaps £300 is quite a big set up fee?

Audaxer

mettlemickey said:

Many thanks for the detailed reply. Very helpful. I will check if the 0.5% covers platform costs as well. I’m not putting £20k in though, just £100 a month, so in that respect perhaps £300 is quite a big set up fee?

I don't think many people putting £100 a month into an S&S ISA would need an IFA. By doing a bit of research on here about low cost multi asset funds and mainstream platforms, I don't think you would need the expense of an IFA.

Marcon

OP - have a look at https://www.moneysavingexpert.com/savings/stocks-shares-isas/

If you google on 'best stocks and shares ISA' you'll get plenty of comparison tables which should help you make your own choice.

dunstonh

duplicate thread in the investments section.  I have answered on that one.

Albermarle

dunstonh said:

duplicate thread in the investments section.  I have answered on that one.

So have I