What level of fees are reasonable? S&S ISA

[ISAmanagementfeeworrier]

I have a long established S&S ISA, which I’ve been dropping relatively small amounts into each month. It’s not a huge pot, I keep well below the annual limit, but will be useful when I’m on SP in future years to supplement income. I plan to liquidise it at that point. I choose low risk funds to invest in (cautious).

The fees look really high to me though, I’d be interested in others experiences for their S&S ISA funds. Not exact numbers, but for example, if a person paid in £400 in a quarter and the charges for account and fund were 70% of that as the annual charge, is that broadly speaking standard for the industry and your experience of fees? Just interested in benchmarking! I appreciate there is an overhead and if I paid in more I guess the ratio would look better, but still. I can’t help but shake the feeling I’m paying much more for management than gives me value, I suppose I’m wondering if I should consider cashing out earlier or switch IFA? NC for this!

IFA is a profession and I have no problem paying for that expert advice I don’t have.

This is true, but you don't seem to have any need for ongoing advice. A single payment for 1 set-up session would have been plenty.

The vast majority of what you pay into your investments should be going into your investments, not on fees. If your figures are correct then for every £1 you pay into your account at the moment you are only actually investing 30p! That's outrageous.

Please don't blame yourself - the problem is people who don't understand this stuff are always told to get an professional advisor - but advisors are like everyone else they range from excellent to bloody awful and if you don't know anything - how would you know if they are rubbish. Even asking around how would someone who chooses an advisor because they don't know anything, know enough to make a recommendation - good years and bad years exist independent of your advisor's ability.
They should be better, the system should be better, people are still being taken for a ride.
If you are are risk averse there are fund you can invest in but you won't make much more than inflation..

Let's assume, as a cautious investor you prefer a 'big name'. If you are paying the same amount into the same fund each month you could go with Lloyds Bank and pay £36 a year platform fee, regular trading is free, then just the 1.2% (or whatever it was) fund fee. Which would be considerably less than your current £840, unless you have close to three quarters of a million in your account.

I pay 0.25% including platform and fund fees/costs. Above a certain amount it is worth changing to fixed platform fees but you need to do the maths.

That is true, but financial advisers are regulated. They can't just charge someone 70% (or whatever the OP said) because they are short on finances that month.

I work for a financial advisers (not an IFA but we do deal with Prufunds) and we have very strict protocol. Yes there is a tiered initial fee system, but for the amounts the OP is talking about, it would be a small initial fee and a small ongoing fee. There are limits you can charge that are set in place. Or, if the OP doesn't require a face to face meeting annually or require a report every 6 months ... then she could go 'ad hoc' and just pay a small fee as and when she does need to meeting with the adviser.

Financial advisers have a long history of ripping off clients and putting them into pensions and funds where they make the highest commission. It is well worth doing your own research and once you get it you won’t need an IFA, and will be a lot better off.

I agree, but rules are tighter now. For instance, we don't get commission anymore for recommending various companies. The fees are all laid out in black and white, and you can't go above them. The OP should just ask her IFA for a breakdown of the fees on her account. It will be easy for them to produce a report showing exactly what she is paying the IFA from her account every month.

If they are stupidly high - then she can report them.

Again, really helpful info and a comparator, thank you @ProfessorBinturong (amazing creatures btw😁)- that’s really useful to know exists as an option. At some point I will stop working and will stop adding into this ISA- at that point it will just sit for a few years until I need it so reducing charges will be really important then, otherwise it could grow by less than inflation and even I know that’d be less than ideal!!!

OP did you say you had around £30k I don’t think that warrants an advisor.

you should just put it in a tracker fund eg Hargreaves Landsdown. I have mine in index funds for USA, uk, Europe etc. it follows the markets. Sure it dips sometimes but usually steadily rises. I’ve made 50%+ in just over 6 years. I don’t pick my own funds, I just do the index ones

If you switched funds as well as provider, you could save even more. For example Vanguard Lifestragegy funds have a range of risk levels, so you could choose a cautious one, and the fund fee is 0.2% of the total pot.

OP, please go to rebel finance- on YouTube.

Googling - looks like the fee limits are a bit woolly - limits that should be "fair". Works on decency. The OP could challenge them through the FCA if they felt the charges weren't "fair" is that correct?

You are comparing the fees for the whole pot to your regular payment amount, which isn't the way to do it. Your fund or funds should have clear information on what the charges are as a percentage or fixed fee. It doesn't necessarily make financial sense be paying a financial advisor for an investment in the 30k bracket. They would generally advise on larger sums. It sounds like you need a cheaper platform and to ditch the adviser. Look to invest in multiple funds, so if one goes down, others may go to.

Just to say the platforms HL and II are both revising their fee structures and I don’t think current comparison tables are accurate.

imo you don’t need a financial advisor. You are investing under £20k per year and your attitude to risk is not going to change as you approach retirement so no need for an annual review. As you near retirement you may want to move to a cash isa with a fixed rate for say 5 years which would top up your pension income.
MSE has information on stocks and shares ISAs and platform fees.
https://www.moneysavingexpert.com/savings/stocks-shares-isas/

Back to whether it’s typical I don’t know. I don’t pay an IFA. I have ISA and SIPP with Charles Stanley and Vanguard. I only pay for platform and fund fees. No meetings. Also because I don’t trade often, I don’t pay transaction fees either. I am 50 and I have only got equity funds. My pension with work is on a lifestyle strategy and that’s plenty cautions enough for my risk appetite.

There is a very good guide to fees on the Monevator website https://monevator.com/choosing-a-investment-platform/

Essentially if you have a smaller portfolio you want a % fee platform, a larger one benefits from a fixed fee arrangement.

Passive funds (index trackers) cost less then actively managed ones and they usually perform better over the longer term.

I think you're being taken for ride. If you have have a. £30k investment you should not be paying for a financial advisor. They charge far too much for such a small investment.

You should be making your own investmenta with such a small amount. Most S&S platforms will have a selection of funds you can invest in eg a global top 500 tracker fund, and that will spread you risk across the geographical and industrial sectors, with charges of about 0.1%.

The s&s platforms with low fees, and no fees with just chargea for transactions instead, which would be cheap for you of you buy into 3 funds and hold them for 10 years

However, the bigger question in my mind is why you have an ISA instead of a private pension. Are you a UK tax payer? If so, you could move your £30k ISA into SIP ( Self invested pension plan) and get an immediate 20% tax rebate into you pension amounting to £6000. (You can only put 100% of your income into a SIPP, so youoght have to do the transfer over a couple of years, but that's easy to do, as you have a tax year end coming g up, so you could transfer some before 5th April, then the rest the next day on 6th April).

future payments would also attract the 20% tax rebate.

Then when you retire (which could be at 55 or 57 onwards depending on you date of birth) you can take 25% out tax free.