IFA fee for ISA set up

mettlemickey

Moved post from pension section…

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

poppy10_2

It's common but far from reasonable. An ongoing fee of 0.5% each and every year to do what? It will significantly detract from your long term returns. Remember the 0.5% is just his fee. On top of that you will have to pay the management charge for the Aviva fund (0.72%), plus as most Aviva funds are just "fund of funds" which contain other investment funds, there will be hidden costs from all the management charges for all the sub-funds.

Just get a Vanguard ISA and stick your money in a LifeStrategy or global index fund. Total charge 0.15%, and will more than likely significantly outperform the rubbish Aviva fund your IFA is recommending. 

Alexland

poppy10_2 said:

Just get a Vanguard ISA and stick your money in a LifeStrategy or global index fund. Total charge 0.15%, and will more than likely significantly outperform the rubbish Aviva fund your IFA is recommending. 

To be fair the Vanguard charge would be 0.15% for the platform and 0.22% for the VLS fund (which is also a fund of funds but the declared charges should include that of the sub funds, or similar charges for one of their global index funds) so around 0.37% but yes still likely to be cheaper than going with the Aviva option especially if also paying for ongoing IFA service although I suspect this is a transactional one-off arrangement.

MM - how much money are we talking about? Is it enough to be worth buying advice compared to spending the time to learn more about low cost DIY investing using these types of single fund solutions? Most of us started investing for the first time without needing an IFA.

mettlemickey

Alexland said:

poppy10_2 said:

Just get a Vanguard ISA and stick your money in a LifeStrategy or global index fund. Total charge 0.15%, and will more than likely significantly outperform the rubbish Aviva fund your IFA is recommending. 

To be fair the Vanguard charge would be 0.15% for the platform and 0.22% for the VLS fund (which is also a fund of funds but the declared charges should include that of the sub funds, or similar charges for one of their global index funds) so around 0.37% but yes still likely to be cheaper than going with the Aviva option especially if also paying for ongoing IFA service although I suspect this is a transactional one-off arrangement.

MM - how much money are we talking about? Is it enough to be worth buying advice compared to spending the time to learn more about low cost DIY investing using these types of single fund solutions? Most of us started investing for the first time without needing an IFA.

It’s just for £100 a month initially. Maybe more as I figure out a bit more about it. 

Alexland

mettlemickey said:

It’s just for £100 a month initially. Maybe more as I figure out a bit more about it. 

For that sort of money it's unlikely to be worth engaging an IFA especially if you have an appetite to learn more. For a beginner you might want to try a Robo such as a Nutmeg Fixed Allocation Portfolio (£75 TopCashBack if you invest £500 lump sum then £100 pm) or a lower ongoing charge DIY platform such as Vanguard Investor using something like a VLS fund
https://www.topcashback.co.uk/nutmeg-stocks-and-shares/
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds

dunstonh

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. 

£300 is dirt cheap.   The 0.5% seems unusual for as your value is going to be very low.  I cannot see how the IFA expects to provide ongoing servicing for that.     I suspect they wont unless they are the family IFA.

Just get a Vanguard ISA and stick your money in a LifeStrategy or global index fund. Total charge 0.15%, and will more than likely significantly outperform the rubbish Aviva fund your IFA is recommending. 

What makes you think it is an Aviva fund?  
The OP makes no reference to an Aviva fund.  Just that the ISA provider is Aviva.  

Beddie

Yes, it is very reasonable. The IFA probably wants you around long-term, so is happy to take a low fee now and have you as a good customer for many years. Nothing wrong with that, of course! Loyalty is a key tenet of an IFA business.

It will get you into investing regularly, you can always review it in the future if not meeting your needs.

Albermarle

Just get a Vanguard ISA and stick your money in a LifeStrategy or global index fund. Total charge 0.15%, and will more than likely significantly outperform the rubbish Aviva fund your IFA is recommending. 

You do not what the fund is, so how can you say its rubbish? Vanguard Life Strategy funds have not exactly been pulling up any trees recently. Plus as already pointed out you are wrong about the Vanguard charging.

OP - As said it is unusual for an IFA to be interested in managing what are rather small amounts of money, and even with the low charge it is still a lot compared to what you want to invest. Better to do some reading.

How to invest in a stocks and shares Isa: The quick and easy guide | This is Money

jimjames

Beddie said:

Yes, it is very reasonable. The IFA probably wants you around long-term, so is happy to take a low fee now and have you as a good customer for many years. Nothing wrong with that, of course! Loyalty is a key tenet of an IFA business.

It will get you into investing regularly, you can always review it in the future if not meeting your needs.

I'm not sure paying £300 for £1200 investment is my definition of reasonable. It might be a low fee compared to what the IFA charges but whether paying 25% out as fee is reasonable or a good idea is another matter. Seems to be the sort of level that DIY or robo is ideal for.