Platform Wraps - Good idea?

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
7 replies 1K views
tigermoth123tigermoth123 Forumite
5 Posts
Hi,

My parents have a number of rather indifferently performing funds (with relatively high charges - approx 2.8%) which they wish to move to a better performing fund. Rather than investing directly in another product, their IFA has recommended using a so called "platform / wrap", in this case Aviva's. Her logic for doing this seems to be as follows:
a) my parents have used up their ISA allowance for this year
b) my parents would like the new fund to be within an ISA
c) this means that it would be necessary to first move the monies to a new fund / provider (in this case Brewin Dolphin is being advised) and then move this fund into an ISA next year (once my parents have their new ISA allowance)

The cost of the wrapper seems to be 0.3%.

Does anyone have experience of using these wrappers? 0.3% doesn't sound like much of course it does build up over time. I am wondering if it is strictly necessary to put the money inside a wrapper like this. Is that the only way to move the money into a ISA fund (in two stages as discussed above)? Or does it depend on the fund / fund provider? i.e. are there some funds which you can invest in as a non-ISA product and then later transfer to an ISA?

Any advice on this subject would be much appreciated.

Regards
Richard

Replies

  • dunstonhdunstonh Forumite
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    Platforms are where most of it goes nowadays.
    Does anyone have experience of using these wrappers?

    That would be most people using an IFA and most DIY investors
    I am wondering if it is strictly necessary to put the money inside a wrapper like this.

    The wrapper is either an ISA or a pension (or one of the other wrappers that exists). Its pretty vital to get the wrapper right. The provider/platform will depend on what features/options and how you want to invest.
    Is that the only way to move the money into a ISA fund (in two stages as discussed above)?

    No but it is usually the best.
    i.e. are there some funds which you can invest in as a non-ISA product and then later transfer to an ISA?

    There is no logical reason for doing that. It could just create unnecessary tax and the adviser would be stuck with a mis-sale. Why do you think it is better to do that considering it would be classed as a mis-sale if done by the adviser?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • LHW99LHW99 Forumite
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    They could leave things alone for the rest of this year, and get the monies transferred next April when they have a new ISA allowance?

    That would be only one move.
  • Keep_pedallingKeep_pedalling Forumite
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    Having everything in a wrapper certainly keeps everything simple. Ours are held in two Transact wrappers, with 40% in an ISA wrapper and the rest in a general investment account. We top the ISA wrap up to the maximum from the GIA along with an annual rebalance, so in the not too distant future the majority will be in the ISA
  • Hi Dunstonh,

    many thanks for your response. Re your point below.....
    There is no logical reason for doing that. It could just create unnecessary tax and the adviser would be stuck with a mis-sale. Why do you think it is better to do that considering it would be classed as a mis-sale if done by the adviser?

    Naturally I wasn't aware that this would be classified as a mis-sale :-) As I haven't come across these wrapper platforms before I am just trying to make sure that my mum and dad are getting the best value for their money. They are in their 70s and 80s and unfortunately this kind of stuff is now beyond them. As a result they are panicking about the IFAs recommendations which they don't understand. I want to make sure that even if my parents don't understand the recommendations, I and my siblings do.

    The reason I asked this specific question was as a result of the 0.3% annual charge. There current funds have a total annual charges of 2.8% (3.3% when you take into account the IFA fees). The performance over the last 10 years has been around 2.3% and as a result they have been losing money. They will be moving some of the money from their existing funds into PruFund Cautious Fund ISAs this year. The IFA is not recommending that these sit within a wrapper. I assumed this is because the money can be moved immediately (i.e. they have ISA allowance available for this year).

    The remainder of the money from the existing funds could only be moved into an ISA next year. As one of the people on this thread suggested, one option would be to simply leave these remaining investments where they are until next year and then move them directly into an ISA (based on an appropriate fund) next year. With this option my understanding is that no Aviva platform (or other) wrapper would be required. But as they are losing money on the current fund it seemed reasonable to move the money straight away into a better performing (and lower charging) fund, and then later convert this same investment into an ISA. My real question is whether it is possible to do this outside of a wrapper. If the answer to that question is "no" then it seems to be a straight choice between using the "wrapper" or waiting until next year and then moving the money directly into a fund ISA.

    Regards,
    Richard
  • zagfleszagfles Forumite
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    3.3% is a ridiculously high charge, particularly for a poorly performing fund, I think that's the issue you need to be looking at first. What are the charges on the new suggested funds?

    Most actively managed funds charge around 0.5-0.8%, trackers can be below 0.1%.
  • dunstonhdunstonh Forumite
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    As I haven't come across these wrapper platforms before I am just trying to make sure that my mum and dad are getting the best value for their money.

    The wrapper is one thing. The platform is another. Platforms offer most of the mainstream wrappers.
    As a result they are panicking about the IFAs recommendations which they don't understand.

    have they told the IFA this? Communication is key. It has to be in both directions. If they keep telling the IFA that they understand when they dont then the IFA wont know.
    The reason I asked this specific question was as a result of the 0.3% annual charge. There current funds have a total annual charges of 2.8% (3.3% when you take into account the IFA fees).

    That is very high. You tend to find that under 2% all in (platform, fund and adviser charge) is common although some funds may take you just over 2%. Are you sure its 3.3% as I havent seen any that high for a long time.
    The performance over the last 10 years has been around 2.3% and as a result they have been losing money.

    Performance is normally displayed net of charges.
    My real question is whether it is possible to do this outside of a wrapper.

    Yes. However, it may be more expensive to do so.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • LHW99LHW99 Forumite
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    One completely different aspect that you and your parents may want to consider when this issue is sorted out would be to arrange for you to have power of attorney for them.
    This can be used for you to help them with their finances, as well as being in place if things get difficult later.
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