Question
I am looking at using a dicretionary management service. namely Best Invest. They recently won the FT / Investor Chronicle Best Wealth Manager Award.
However, I want to know what the overall charge is for me to use their service. As I understand it from some of your most informative articles, the total cost is likely to be:
Best Invest Management Fees 1.0% plus VAT = 1.20%
External fund Manager Fees, say 1.5%
less. rebate, they state (0.5%)
Total Potential charge is 2.2% per annum
plus there are likely to be transaction charges to - but I dont know the average percentage
Are these figures and my understanding correct?Answer
Without wishing to belittle Bestinvest's discretionary service (which from my experience when working there a few years ago was pretty good), I've never paid much attention to awards. Publications run awards events primarily to make money - via sponsorship, charging companies to attend a ceremony and then charging winners to use the logo on websites and literature. Sadly the due diligence process for selecting winners tends to be rather variable - some are good while others almost non-existent - and it's nigh on impossible for us (the public) to know how rigorous any particular award judging has been.
Anyway, back to charges, your understanding looks correct. Technically the external fund charges are more likely to be around 1.6% - 1.7% (using the total expense ratio fund charge figure which includes a few extra costs), but then some funds and investment trusts held might have lower annual charges, so I think your 2.2% figure is probably quite realistic.
I don't think there are dealing charges for funds, but I'd expect dealing fees if the investment managers buy investment trusts (as they're stock market traded investments). Bestinvest doesn't disclose these on its website, which is a bit frustrating. Given you can trade online for less than £10 per deal these days I'd be concerned if the amount was much more than this.
When using a discretionary management service the sums involved tend to be large, so I'd always suggest 'interviewing' at three different companies before making a decision.
As well as clarifying charges, ask to see some sample portfolios along with past performance. And check exactly what sort of service is included in the cost. Will the manager simply run your portfolio, or will they also provide some tax planning and financial advice too where necessary?
I'd also check how bespoke the service will be. Some 'discretionary' managers simply stick your money into an in-house fund of funds, which is hardly bespoke or very flexible (although very profitable for the manager). It's natural that discretionary investment managers will hold their favoured investments across many of their client's portfolios, but it's important they can cater for any specific needs or preferences you might have.
Finally, although discretionary investment management is. by nature, quite hands-off from your point of view, it can be very helpful to be able to view your portfolio online along with comparative performance to relevant benchmarks. This means you can check how your money's invested whenever you want and ascertain how good (or bad) a job the investment manager is doing.
I am looking at using a dicretionary management service. namely Best Invest. They recently won the FT / Investor Chronicle Best Wealth Manager Award.
However, I want to know what the overall charge is for me to use their service. As I understand it from some of your most informative articles, the total cost is likely to be:
Best Invest Management Fees 1.0% plus VAT = 1.20%
External fund Manager Fees, say 1.5%
less. rebate, they state (0.5%)
Total Potential charge is 2.2% per annum
plus there are likely to be transaction charges to - but I dont know the average percentage
Are these figures and my understanding correct?Answer
Without wishing to belittle Bestinvest's discretionary service (which from my experience when working there a few years ago was pretty good), I've never paid much attention to awards. Publications run awards events primarily to make money - via sponsorship, charging companies to attend a ceremony and then charging winners to use the logo on websites and literature. Sadly the due diligence process for selecting winners tends to be rather variable - some are good while others almost non-existent - and it's nigh on impossible for us (the public) to know how rigorous any particular award judging has been.
Anyway, back to charges, your understanding looks correct. Technically the external fund charges are more likely to be around 1.6% - 1.7% (using the total expense ratio fund charge figure which includes a few extra costs), but then some funds and investment trusts held might have lower annual charges, so I think your 2.2% figure is probably quite realistic.
I don't think there are dealing charges for funds, but I'd expect dealing fees if the investment managers buy investment trusts (as they're stock market traded investments). Bestinvest doesn't disclose these on its website, which is a bit frustrating. Given you can trade online for less than £10 per deal these days I'd be concerned if the amount was much more than this.
When using a discretionary management service the sums involved tend to be large, so I'd always suggest 'interviewing' at three different companies before making a decision.
As well as clarifying charges, ask to see some sample portfolios along with past performance. And check exactly what sort of service is included in the cost. Will the manager simply run your portfolio, or will they also provide some tax planning and financial advice too where necessary?
I'd also check how bespoke the service will be. Some 'discretionary' managers simply stick your money into an in-house fund of funds, which is hardly bespoke or very flexible (although very profitable for the manager). It's natural that discretionary investment managers will hold their favoured investments across many of their client's portfolios, but it's important they can cater for any specific needs or preferences you might have.
Finally, although discretionary investment management is. by nature, quite hands-off from your point of view, it can be very helpful to be able to view your portfolio online along with comparative performance to relevant benchmarks. This means you can check how your money's invested whenever you want and ascertain how good (or bad) a job the investment manager is doing.
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