Should we be worried about our investment?

chesky369

I think part of your problem is that your IFA isn't explaining fully what he's doing and why he's doing it. For instance, most investing is for the long term, particularly at the moment. Next time you meet (and I think it should be fairly soon), you must really put your cards on the table and ask him to talk to you in a non-jargon way, so that you completely understand where he's coming from and, in return, that he understands that you aren't entirely happy with what he's done so far. He must explain his actions clearly. Look on him as a hairdresser - if he wasn't doing your hair right, you'd soon tell him what was wrong. There's no difference - you're paying and you expect a good service, explained properly.

Lastly, I'm afraid you couldn't have joined the investment process at a worse time - heard the term 'credit crunch'? It means ALL of us are having a very dodgy time, we just hope (with justification) that it'll be OK in the long run.

pinky13_2

LongTermLurker wrote: »

That's not right: 1.05% of £90k would be £945, but you said you had £40k in cash.

Therefore, cash fee = £180pa and shares fee = £300pa = £480 fee = 0.5333'% of the original £90k.

Then your IFA charges 1% of the £90k, so that is £900.00
£900 + £480 = £1380 = 1.5333'% combined fee.

Transact also charged us:

Initial charge= 0.5% +
New purchase charge=0.2% (obviously the first charge is a one-off and the second is dependant on whether we do any new purchases).

So in the first year with Transact we have paid 0.5+0.2+0.60+0.45 = 1.75% so that is quite a bit more (sorry just had to look through the reams of paperwork to find those figures).

jamesd

pinky13,

Please explain this in more detail:

0.60 % annual charge on investment +
0.45 % annual charge on cash
so overall annual charge of 1.05%

How do you get charging on the investment part at 0.6% or charging 0.45% on the cash part to add together? Surely the money is in investments or in cash, not in both at the same time?

Is the 0.5% cost to buy the stamp duty/stamp duty reserve tax or something else? If it's stamp duty it's standard and paid to the government.

0.2% paid on buying, plus stamp duty, is fairly reasonable - it's probably a mixture of 0.25% on some and 0% on others that works out to 0.2 overall.

It sounds as though you're paying 1% a year and may be getting the funds with no annual commission paid to the companies involved, just the basic annual management charge that the funds make, typically in the 1% range once trail commission is eliminated.

jem16

pinky13 wrote: »

Our IFA is charging us 1% yearly on our whole portfolio (including cash) so we are paying 1.05% + 1.00 % yearly.

Your IFA is taking twice the normal trail commission for IFAs - Transact allow the IFA to set his/her own commission. There is a good thread here where Dunstonh explains what Transact does.

http://forums.moneysavingexpert.com/showthread.html?t=897879&highlight=transact

If you are happy that the IFA is doing something to justify this extra commission then it is money well spent. However you seem to be having communication problems.

Have you asked the IFA for more clarification of exactly what is happening with your investment - perhaps you would feel happier if it was explained better.

jem16

jamesd wrote: »

Is the 0.5% cost to buy the stamp duty/stamp duty reserve tax or something else? If it's stamp duty it's standard and paid to the government.

The 0.5% charge is the amount Transact charge to put the investment onto their platform. Once on their platform it can be used to buy pensions, unit trusts ISAs etc. It's like a fund supermarket but allows more.

0.2% paid on buying, plus stamp duty, is fairly reasonable - it's probably a mixture of 0.25% on some and 0% on others that works out to 0.2 overall.

The 0.2% is for switches within the fund. Fidelity Funds Supermarket charge 0.25% for switches.

It sounds as though you're paying 1% a year and may be getting the funds with no annual commission paid to the companies involved, just the basic annual management charge that the funds make, typically in the 1% range once trail commission is eliminated.

The annual management charge is discounted according to the amount placed with Transact. Up to £50k no discount, on the next £100k 15% discount, on the next £100k 25% and on the rest 35%. So the higher your investment the better value transact becomes.

So from that I would assume that the OP is getting a discount of 15% on £40k of the portfolio. So amc would be 1% plus Transact's charges of 0.6% on the first £50k and 0.85% plus 0.6% on the next £40k.

pinky13_2

jamesd wrote: »

pinky13,

Please explain this in more detail:

0.60 % annual charge on investment +
0.45 % annual charge on cash
so overall annual charge of 1.05%

How do you get charging on the investment part at 0.6% or charging 0.45% on the cash part to add together? Surely the money is in investments or in cash, not in both at the same time?

The 'wrap' is made up of a cash element and investments. We are charged for the whole wrap with a 0.60% applied to the investment element and the 0.45% applied to the cash element so we are charged on both.

jamesd wrote: »

Is the 0.5% cost to buy the stamp duty/stamp duty reserve tax or something else? If it's stamp duty it's standard and paid to the government.

0.2% paid on buying, plus stamp duty, is fairly reasonable - it's probably a mixture of 0.25% on some and 0% on others that works out to 0.2 overall.

Stamp duty? I think you are confused. We do not own any property. The investment element of our wrap has some shares in property. We are not paying any stamp duty. We are paying tax on our earnings from stocks and shares although we have some in an ISA so this is tax sheltered.

jamesd wrote: »

It sounds as though you're paying 1% a year and may be getting the funds with no annual commission paid to the companies involved, just the basic annual management charge that the funds make, typically in the 1% range once trail commission is eliminated.

Last night I went through all the paperwork and I still can't understand it. Our FA has sent us a list of applied fees but has yet to get back to us regarding the breakdown. It just seems to me and my partner that the FA is very badly organised. The problem is that after paying so much in fees do we pull out now or just wait and see what happens? Our friend who recommended them to us has done rather well with them and says that is just the impact of the credit crunch and that our shares are actually not doing badly considering how bad the market is and that they are actually a very good FA but can be a little disorganised which is what we also beleive. So we are not sure what to do.We do trust our friend very much on this.

purch

Stamp duty? I think you are confused. We do not own any property

Stamp Duty is not just charged on residential property purchases

Stamp Duty is also charged on Equity/Share purchases.

You will have paid Stamp Duty when the Shares were bought for your portfolio, and then again for any subsequent Share purchases.

Who made the Investment choice of the individual company's that you bought Shares in, and who makes any subsequent investment decisions ?

jem16

The 0.5% and 0.2% are fees to use the Transact wrap platform - nothing to do with Stamp Duty.

Pinky13 - can you clarify what is inside your Transact wrap - i.e. what are the actual funds that your IFA has chosen for you?

purch

the rest is invested in 15 different stocks/shares

I thought it was in individual stocks not Funds

chesky369

Careful - I think there's a danger of confusing the OP even more.