Question
I have been with Skandia Investment solutions for some time and I was told be my IFA there was no charge for switching funds within the platform. I have been switching for a year or so.
It was not clear from Skandia literature but I have just called them after I seen a 5% entry charge on a fund I wanted to switch into and after having to ask some colleagues the advisor told me that funds can charge fees like this.
I am angry that I missed this but also because they and my IFA have told me that once in the find there is no charge for switching and the 5% is significant. Can you advise, it has probably cost me quite a bit so far. Answer
This sounds very strange. Skandia's own website confirms that there are no initial fund charges on its platform.
The initial charge isn't always the whole story, as unit trusts have a difference between buying and selling prices, called a bid-offer spread. Bid-offer spreads largely comprise the initial charge, but may also include other costs incurred by the fund of creating new units, i.e. stamp duty and dealing costs on the underlying investments bought within the fund. Nevertheless, it's rare for these extra costs to add more than 1%-2% on top of the initial charge (which Skandia doesn't apply), so this still wouldn't account for the 5% figure you've been quoted.
The only other reason for a charge I can think of is if the IFA has opted to sales commission on switches (which would have required your consent), as Skandia allows them to take up to 3%. I'd ask your adviser to clarify whether this is the case. If so, complain very strongly unless the adviser has made you aware they're taking commission on switches (which is a pretty shady practice in any case unless significant work is involved).
If the above doesn't solve the mystery then please post more information below about the funds on which the charge is being applied and whether they're held in an ISA, pension or investment bond and I'll investigate further.
I have been with Skandia Investment solutions for some time and I was told be my IFA there was no charge for switching funds within the platform. I have been switching for a year or so.
It was not clear from Skandia literature but I have just called them after I seen a 5% entry charge on a fund I wanted to switch into and after having to ask some colleagues the advisor told me that funds can charge fees like this.
I am angry that I missed this but also because they and my IFA have told me that once in the find there is no charge for switching and the 5% is significant. Can you advise, it has probably cost me quite a bit so far. Answer
This sounds very strange. Skandia's own website confirms that there are no initial fund charges on its platform.
The initial charge isn't always the whole story, as unit trusts have a difference between buying and selling prices, called a bid-offer spread. Bid-offer spreads largely comprise the initial charge, but may also include other costs incurred by the fund of creating new units, i.e. stamp duty and dealing costs on the underlying investments bought within the fund. Nevertheless, it's rare for these extra costs to add more than 1%-2% on top of the initial charge (which Skandia doesn't apply), so this still wouldn't account for the 5% figure you've been quoted.
The only other reason for a charge I can think of is if the IFA has opted to sales commission on switches (which would have required your consent), as Skandia allows them to take up to 3%. I'd ask your adviser to clarify whether this is the case. If so, complain very strongly unless the adviser has made you aware they're taking commission on switches (which is a pretty shady practice in any case unless significant work is involved).
If the above doesn't solve the mystery then please post more information below about the funds on which the charge is being applied and whether they're held in an ISA, pension or investment bond and I'll investigate further.
Read this Q and A at http://www.candidmoney.com/questions/question702.aspx
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