IFA Fees- expensive?

[LizzieSiddal]

Hi there

Dh and I saw an IFA this morning who came recommended, but I’m a bit shocked by the charges.

The company charges a 3% fee for all new money put into the fund.
They then charge a 1% fee each year on the whole fund
The actual funds will charge up to 1% but probably more likely 0.75% every year.

I was expecting the two lots of fees for managing the funds, but the upfront 3% on all new money, seems a lot.

Is this the norm?

TIA

I should add, I have tried Google but am not having much look finding any specific upfront fees.

We've bitten the bullet recently, rather than leaving money sat earning no interest.

The initial cost was high, but was offset against the first year's fee.

So far (literally within a couple of months) the investment has paid the annual fee - 'although this can go up as well as down!!!'

We did speak to someone who was recommended to us and we sort of knew, as we felt this was important.

It took us ages to make a decision (years) and I'm now kicking myself for not pushing it through sooner.

How much money are we talking about (investment pot size). Sounds like extortion to me, but insufficient info to go on.

If you want to share bit more info it's easier to give you some comparable fees for fund mgmt, and brokerage costs execution & maintenance. It's personal info so I understand if you don't.

Try Best Invest or Hargreaves Lansdown

I don’t mind share my

It’s a 100,000

And we are pretty clueless so would prefer a managed fund.

Excuse the random *my

Be aware that if you add to the investment at a later date, you will be charged the initial 3% commission again (unless you've agreed it is a one off), regardless of whether or not the IFA has actually done any more work.

Random Yes, I did ask for that to be clarified and it is 3% of any new money going in. Every single time!

It sounds pretty standard tbh. I used to work for a company which charged 4% initial plus 1% ongoing fee. The lowest I would expect to see is 2% initial for a brand new client if you're having face to face meetings, risk profiling, full analysis and recommendation etc.

Thanks Pussin but is that a 2% initial fee or for all new money put in, as long as the fund is running?

LizzieSiddal OK, here's a quick counter-example for 100k.

Brokerage, consider interactive investor who will charge you £90 per year to hold your investments in either a single or joint account (Inc transaction credits). Lets say you chose a single tracker of global equities, automatically replicating the market of over 3000 securities (ie diversified) and self-rebalancing with market movements. Transaction is free as included in your £90 mgmt fee. The fund (say, VWRL by vanguard) will automatically deduct their ongoing charges of 0.25% per annum i.e approx £250. Similar scenario for UK FTSE 100 trackers like ishares ISF, except their ongoing fund charges are lower at 0.07% (£70) per year....

So, rough illustrative total fees =£340 global (or £160 for UK FTSE 100) self-balancing fully diversified fund (with all transaction fees, fund fees, brokerage fees and dividend reinvestment included within that). No up front costs.
Hope that gives you a feel for an alternative way of managing things.
Best of luck whatever you decide.

Thanks Anakin.thats a huge difference!

I will have a look at the Vanguard site and see if I can understand any of it!

Its food for thought isn't it. Here's the link to the "interactive investor" brokerage I mentioned above (flat fee is best mgmt charge structure for your pot size) www.iii.co.uk

Tailored advice from an IFA can't replicate that from a company such as Hargreaves Lansdowne or iii, who are for DIY investors though.

I think it's high. I'm a Chartered IFA! 2% + 0.5% ongoing is more normal IMO... unless it's St James's place, then just pull your pants down and take the spanking

I NEVER recharge the initial fee at the same level. Topping Up is easy and if you're an ongoing client I will charge 1% or sometimes (for pensions 0%). We still have to do all the reports and recommendations, and we're liable, but the research is done.

Problem you have is we're all too busy and the amount of work we have to do for the FCA is ridiculous.

Dontcall your fees seem much more reasonable.

We’ve decided tonight we really aren’t happy to keep paying the upfront fees.
So I will be doing more research to find another company who can help.

You could swot up and do it yourself. If you use Hargreaves Lansdowns top 100 funds and follow their investing guides, it’s probably as good as using an IFA for amounts less than 1m pounds.