Question
I have a ISA Fund with Invesco Perpetual, which I've had for 10 years and the funds are performing well, I called up my IFA the other day and asked to invest a lump sum in order to top up my ISA allowance but he has said that I should move it to a fund supermarket Fidelity, as Invesco have stopped the commission he used to get.
By doing this will I be better off or has he mentioned this because he will be getting more commission from them?Answer
As of 31 December 2012 financial advisers have been banned from taking sales commission where advice is given. However, commission paid on existing investments and policies can remain in place until such a time the adviser recommends a change, for example a fund switch or additional contribution.
So if your IFA recommends additional contributions into your Invesco Perpetual ISA then yes, the commission tap will be turned off. However, fund charges should reduce too reflecting that commission is no longer paid from fund charges. Your IFA would then negotiate a fee (called 'adviser charge') with you that you can either pay him directly or agree to have it deducted from your ISA.
If he transfers your ISA to FundsNetwork the same will hold true. Commission is not allowed and he will have to agree a fee with you in writing, which you can pay directly or via your ISA.
While using a fund platform like FundsNetwork provides greater investment choice, this would be of little benefit to you if you're happy with your Invesco Perpetual fund(s) - especially if your adviser charges you a fee for recommending the transfer.
In the past Invesco Perpetual have very likely paid your adviser 3% initial commission on any new investments and 0.5% annual trail commission on the full amount invested. If your IFA tries to charge you more than this under the new regime then I'd ask him why and decide whether his advice and service justify this.
If you decide you can do without an adviser then perhaps consider using a discount broker/platform who'll either rebate commission back to you or use cheaper versions of the funds in return for an admin fee - Cavendish Online and Charles Stanley Direct are good examples.
Hope this helps.
I have a ISA Fund with Invesco Perpetual, which I've had for 10 years and the funds are performing well, I called up my IFA the other day and asked to invest a lump sum in order to top up my ISA allowance but he has said that I should move it to a fund supermarket Fidelity, as Invesco have stopped the commission he used to get.
By doing this will I be better off or has he mentioned this because he will be getting more commission from them?Answer
As of 31 December 2012 financial advisers have been banned from taking sales commission where advice is given. However, commission paid on existing investments and policies can remain in place until such a time the adviser recommends a change, for example a fund switch or additional contribution.
So if your IFA recommends additional contributions into your Invesco Perpetual ISA then yes, the commission tap will be turned off. However, fund charges should reduce too reflecting that commission is no longer paid from fund charges. Your IFA would then negotiate a fee (called 'adviser charge') with you that you can either pay him directly or agree to have it deducted from your ISA.
If he transfers your ISA to FundsNetwork the same will hold true. Commission is not allowed and he will have to agree a fee with you in writing, which you can pay directly or via your ISA.
While using a fund platform like FundsNetwork provides greater investment choice, this would be of little benefit to you if you're happy with your Invesco Perpetual fund(s) - especially if your adviser charges you a fee for recommending the transfer.
In the past Invesco Perpetual have very likely paid your adviser 3% initial commission on any new investments and 0.5% annual trail commission on the full amount invested. If your IFA tries to charge you more than this under the new regime then I'd ask him why and decide whether his advice and service justify this.
If you decide you can do without an adviser then perhaps consider using a discount broker/platform who'll either rebate commission back to you or use cheaper versions of the funds in return for an admin fee - Cavendish Online and Charles Stanley Direct are good examples.
Hope this helps.
Read this Q and A at http://www.candidmoney.com/askjustin/847/is-my-ifa-recommending-isa-transfer-to-pocket-more-money
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