Question
I am considering investing just under £200k with a Discretionary Fund Manager. My Financial Adviser recommends the DFM service operated by RSM Tenon, for which he works. I have been right through their process of establishing risk profile and recommending a portfolio, etc, and am confident of RSM's integrity and service, but want to check comparative fee levels before committing.
Their 'Weighted Underlying Investment Annual Management Charge' (which my questioning of them suggests is all-inclusive) is 2.09%, which looks OK compared to your recent answer to another questioner on this subject.
However, there is an 'Initial Advice Charge' of 3% at set-up, amounting to over £7500, which they will deduct from my initial investment before it is made. Is this normal and reasonable? Would it be normal to try to haggle on this amount?
I've looked at websites of other DFM providers and it is very difficult to get a clear picture of their fees.
Thanks in anticipation of your adviceAnswer
3% tends to be the norm for initial sales commission when buying a unit trust via a financial adviser. In this instance it's being described as a 'fee', but RSM Tenon is obviously trying to pocket the same amount of money as if they were working on a commission basis.
However, while 3% might be reasonable on smaller sums, it looks pretty extortionate on larger sums. For this reason, most discretionary managers try to get way with around 1% upfront instead, although some don't charge upfront fees at all, Bestinvest for example.
So, unless the adviser is carrying out extensive other work within the 3% fee then it's a blatant rip-off - it doesn't take £7,500 worth of advice to recommend putting your money into their own discretionary management service.
Given RSM Tenon will be pocketing a chunk of the 2.09% annual fee themselves every year you hold the investments it seems very greedy to be taking much, if anything as an initial fee.
Bearing this in mind you won't be surprised to hear me urging you to haggle. I'd ask them to waive the 3% fee, or at least reduce it to 0.5% at most. Even 0.5% on £200,000 is £1,000, which sounds like too much to me, but if you're otherwise happy with the adviser and don't want to end the relationship it might be worthwhile. Although personally I could never trust a financial adviser who tries to get away with such obscene fees!
Being cynical, I fear some financial adviser's are encouraged to sell their own company's discretionary management services over other investment solutions as it's usually more profitable for the company.
I am considering investing just under £200k with a Discretionary Fund Manager. My Financial Adviser recommends the DFM service operated by RSM Tenon, for which he works. I have been right through their process of establishing risk profile and recommending a portfolio, etc, and am confident of RSM's integrity and service, but want to check comparative fee levels before committing.
Their 'Weighted Underlying Investment Annual Management Charge' (which my questioning of them suggests is all-inclusive) is 2.09%, which looks OK compared to your recent answer to another questioner on this subject.
However, there is an 'Initial Advice Charge' of 3% at set-up, amounting to over £7500, which they will deduct from my initial investment before it is made. Is this normal and reasonable? Would it be normal to try to haggle on this amount?
I've looked at websites of other DFM providers and it is very difficult to get a clear picture of their fees.
Thanks in anticipation of your adviceAnswer
3% tends to be the norm for initial sales commission when buying a unit trust via a financial adviser. In this instance it's being described as a 'fee', but RSM Tenon is obviously trying to pocket the same amount of money as if they were working on a commission basis.
However, while 3% might be reasonable on smaller sums, it looks pretty extortionate on larger sums. For this reason, most discretionary managers try to get way with around 1% upfront instead, although some don't charge upfront fees at all, Bestinvest for example.
So, unless the adviser is carrying out extensive other work within the 3% fee then it's a blatant rip-off - it doesn't take £7,500 worth of advice to recommend putting your money into their own discretionary management service.
Given RSM Tenon will be pocketing a chunk of the 2.09% annual fee themselves every year you hold the investments it seems very greedy to be taking much, if anything as an initial fee.
Bearing this in mind you won't be surprised to hear me urging you to haggle. I'd ask them to waive the 3% fee, or at least reduce it to 0.5% at most. Even 0.5% on £200,000 is £1,000, which sounds like too much to me, but if you're otherwise happy with the adviser and don't want to end the relationship it might be worthwhile. Although personally I could never trust a financial adviser who tries to get away with such obscene fees!
Being cynical, I fear some financial adviser's are encouraged to sell their own company's discretionary management services over other investment solutions as it's usually more profitable for the company.
Read this Q and A at http://www.candidmoney.com/questions/question613.aspx
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