Do clean fund versions have better income yields?

Question
If a unit trust takes it`s annual management charge from income, am I right in thinking that post RDR the `clean version ` will produce a higher yield; as the AMC is lower?Answer
Yes, you're quite right.

Let's assume a fund charges 1.5% a year, which is taken from income before its paid out to investors. if the fund receives annual income equivalent to 4% of the fund, 2.5% (4 - 1.5) will be paid out to investors.

if the clean version of the fund charges 0.75% then 3.25% will be paid out (4 - 0.75).

Obviously, you may end up paying additional platform/discount t broker fees out of capital, potentially offsetting some of the benefit, but this is still a positive consequence of explicit clean charging.

Read this Q and A at http://www.candidmoney.com/askjustin/881/do-clean-fund-versions-have-better-income-yields

Should I use more than one fund platform for safety?

Question
After the financial crisis, people were advised to split their money between banks so that their money didn't go over the compensation limit of £85,000. Would you advise doing something similar with investments on fund supermarkets/investment platforms? What is the compensation limit in this case?Answer
Fund supermarkets/platforms, along with most stockbrokers these days, hold your money and investments in what's called a nominee account.

Nominee accounts are separate companies owned by platforms/stockbrokers that hold shares or funds on behalf of all their customers. While the nominee company owns the investment(s), it promises to pay customers what they're owed - i.e. dividends and proceeds when shares/funds sold, or the shares/units themselves if you move the nominee account to another broker. And the nominee company assets are ring-fenced from the main business , i.e. the platform/broker is not allowed to withdraw your money or investments for themselves.

So technically your money is safe. if the platform/broker goes bust the nominee account should be unaffected, save for a delay in finding another platform/broker to take on the nominee account or the investments being re-registered into your name.

However, in the event someone illegally dips their fingers into the nominee account you could lose money. While the chances are very slim when using an established, reputable company, I guess we should never say never.

In this event, assuming the platform/broker can't afford to make good the loss and goes bust then your claim would fall on the Financial Services Compensation Scheme (FSCS), giving you 100% protection on the first £50,000 invested per institution (i.e. platform/broker).

The funds you hold within the platform should also be covered by the FSCS giving £50,000 of protection per fund management company. So if fraud occurs at the fund level (rather than the platform) you'll be separately covered, Cash accounts (for example, within a SIPP) are likewise covered up to £85,000.

Should you use more than one platform for this reason when larger sums of money are involved?

I'm torn. In general I'd say no, as it rather defeats the point of using platforms in the first place (which is to make administration simple). However, when there's a risk, albeit very small, that someone could theoretically walk off with your life's savings it does seem sensible to ensure full FSCS protection.

I think this ends up being a personal choice, based on how much you value total peace of mind over convenience.

You can read more about nominee accounts in my article here.

Read this Q and A at http://www.candidmoney.com/askjustin/880/should-i-use-more-than-one-fund-platform-for-safety

Transfer from Hargreaves Lansdown to Cavendish Online?

Question
Thanks for your brilliant and informative website which I have only just discovered. I have substantial (for me) ISA and SIPP investments on the H-L Vantage Platform.

My ISA is in 9 different funds, as is my SIPP. I can see from your website that I am no longer getting the best value from using this platform. It would appear that as things stand that I would be better off using Cavendish for my ISA, not so sure about my SIPP.

However, is it worth waiting to see what H-L have up their sleeves as far as RDR is concerned or should I just take the jump and move to a cheaper platform like Cavendish now. Cavendish seem to have been good value for some time now and one would perhaps expect this to continue.

Anyway, keep up the good workAnswer
Thanks for the kind words, glad you like the site.

Cavendish online is very good value for ISAs provided you're comfortable with a straightforward no-frills service.

The main issue moving your ISA away from Hargreaves Lansdown (HL) is their steep £25 per fund charge (the previously charged VAT has recently been removed) to move your investments 'as is' (called 'in-specie') to another platform such as Fidelity FundsNetwork (as used by Cavendish) - on your 9 ISA funds this means a £225 bill. You can avoid the charge by selling the funds and transferring cash, but this means being out of the market for maybe a week or more.

HL has already said they'll likely charge a percentage fee of some sorts when they finally introduce their RDR charging (which must be by 6 April 2014 at the latest). Given their commission margin (after the loyalty bonus) averages about 0.6% a year it's not unreasonable to expect the average fee under the new charging to be similar.

This gives HL a big potential headache - customers may view the cost as too high once laid out in black and white. HL's response appears to be trying to negotiate lower fund charges than rivals, so they can add their healthy fee and not end up excessively expensive overall. Whether they manage to pull it off remains to be seen. But I suspect that even if they do negotiate rock bottom fund charges competitors will demand the same deals from fund managers and HL could still end up looking relatively expensive.

Since Cavendish Online (and underlying platform FundsNetwork) will also have to amend their charging I'd sit tight for now, especially given the high in-specie charge HL will impose. Provided Cavendish Online can negotiate the same current ISA deal via explicit fees - that is you'll pay 0.2% to FundsNetwork, 0.05% to Cavendish and 'clean' fund charges - the proposition should remain very competitive and well worth considering. But for the sake of a few months probably better to wait until the platforms and discount brokers have announced their new charging structures so you can compare the whole market.

Cavendish Online's SIPP proposition is a bit clunky and less appealing than some other rivals - take a look at my comparefundplatforms site to compare costs for the specific funds you hold.

Read this Q and A at http://www.candidmoney.com/askjustin/878/transfer-from-hargreaves-lansdown-to-cavendish-online

Are retail corporate bonds a good deal?

There's been a trend in recent years for some companies to offer 'retail' corporate bonds direct to the public, rather than the more usual route via markets. The Jockey Club and Nuffield Health being the latest examples. Although the interest rates on offer often look tempting versus savings accounts, are there catches? And should you take the plunge?.

What are corporate bonds

In simple terms an IOU from a company. In return for lending them money, they promise to pay you a fixed rate of interest for a fixed period of time and then repay the money you originally lent them (referred to as 'redemption'). You can read more on our Fixed Interest investments page.

Why do companies issue corporate bonds?

Because they want to borrow money. Alternatives include floating on the stock market (or, if they already are, issuing more shares) and bank loans. Issuing a bond can be attractive to companies who can't borrow money as cheaply from a bank and/or whose owners don't want to dilute their stakes.

How do retail corporate bonds differ from conventional?

The main difference is that retail corporate bonds are targeted at private investors, whereas conventional bonds are largely held by big institutional investors such as investment and pension funds. And while conventional corporate bonds may be traded via markets, some retail bonds forbid a change of owner, i.e. you must hold the bond until redemption. Retail bonds also tend to run over shorter periods of around 5 years, whereas 10+ years is more typical for conventional.

Why do companies issue retail corporate bonds rather than conventional?

Being cynical, companies turn to private investors when they think they stand a better chance of either raising the money or paying a lower rate of interest versus targeting intuitional investors. In fairness, the cost of issuing retail bonds is usually lower than conventional, so it can make more sense for companies to take this route when trying to raise more modest sums.

What happens if the company can't afford to pay me back?

You'll very likely lose some or all of your money. And, unlike savings accounts, such losses are not covered by the Financial Services Compensation Scheme (FSCS). The same holds true if the company can't afford to pay you interest. Bonds vary as to where they rank in the creditor pecking order if a company goes bust, but in general don't expect to get much, if anything back should the company become insolvent.

What are the risks?

The main risk is that company can't afford to pay you interest and/or repay the sum borrowed. As above, this could mean losing some or all of your money. The trouble is, it's very difficult to gauge the likelihood of this. Without having an in depth knowledge of the company and industry concerned you'll probably have to take a leap of faith based on the information within the bond's prospectus - far from satisfactory.

Rising inflation and/or interest rates are also a threat. High inflation will reduce the amount future interest payments and your capital at redemption can buy. While higher interest rates could make the fixed interest payments you receive look less appealing.

What else should you watch out for?

If a bond is non-transferable then you've no choice but to hold until redemption, bad news if you need to get your hands on the money meanwhile. If a bond may be traded then you could sell before redemption, but might get back a higher or lower amount than your original investment depending on its market price at that time.

Some retail bonds include a gimmick within a high headline interest rate. For example, the Jockey Club bond quotes 7.25% annual interest (before tax), but 3% of this is paid via credits to spend at the races - not much use unless you're a keen racing fan - and 4.25% a year sounds far less appealing.

Never invest in a retail bond without reading the prospectus cover to cover. Yes, it's mostly dull as dishwater, but it may highlight specific risks or issues you'll otherwise miss. And keep an eye out for potential liabilities that could hit the company in future, for example debts that need repaying or a final salary pension scheme in deficit.

Does the interest on offer outweigh the risks?

This is something you'll have to judge yourself. However, if the retail bond term is 5 years then compare the interest offered to the rate on a 'best buy' 5 year fixed rate savings account - about 3% at the time of writing. The savings account is 'risk-free' (in so far as the first £85,000 is covered by the FSCS if the bank can't repay you), so any bond interest in excess of that is effectively the 'premium' you're getting to take some risk.

In the case of the Nuffield Health retail bond paying 6%, you're getting an extra 3% a year to compensate for the potential risks. Some might find this acceptable, others probably not.

Should you buy retail bonds?

Never buy them as a direct alternative to a savings account - there are risks involved and you could lose some or all of your money.

Otherwise you'll need to weigh up the risks versus the potential return on offer. And this is perhaps the big stumbling point. Most private investors, me included, would struggle to gauge the potential risks with any degree of accuracy. Without the ability and/or time to thoroughly understand a company's business, accounts and bond terms and conditions, investors (to varying degrees) end up having to take a punt.

On balance I don't think retail bonds are necessarily bad (each must be judged on its merits), but if one of these bonds does go belly up in future we can expect a lot of investors moaning they didn't have a clue what they were buying!

Read this article at http://www.candidmoney.com/articles/272/are-retail-corporate-bonds-a-good-deal

Best platform for regular fund ISA saving?

Question
I would like to start investing on a monthly basis into a stocks and shares ISA. Pleas could you advise on the best platform to use in terms of low charges, good selection of funds and ease if use.Answer
In simple terms there are currently two different models of how platforms charge customers.

The first is to charge a fixed annual amount for the use of the platform with dealing fees usually applied to funds too. This is often the best value for larger portfolios, especially if you don't trade funds that often.

The other is to charge a percentage amount (either directly or via retained commissions) based on the value of investments you hold, with dealing fees seldom applied to funds. This is usually the cheaper route for smaller sums.

You don't really want to pay dealing charges on monthly fund savings, even though some platforms offer a £1.50 monthly dealing option, and fixed annual platform charges tend only to become cost effective when investing c£50,000 or more, so the latter percentage route is likely to be your best option.

Charles Stanley Direct offers nice, clean, pricing - that is low cost funds without commissions/platform fees built in and a 0.25% annual charge. Fund research is still a bit thin on the ground, as it's a new entrant, but this may improve in future. TD Direct Investing offers a similar deal, but with a higher 0.35% annual charge. Bestinvest still uses old school pricing, that is it receives commission (usually via higher fund charges) and rebates some to customers, but should still be fairly competitive in this scenario and offers good fund research and tools - the same holds true for rPlan. Cavendish Online also uses the commission rebate model and offers few frills, but tends to be cheap and uses the proven FundsNetwork platform.

The main consideration when using platforms/discount brokers who currently still receive/rebate commission is that their pricing model will need to change by 6 April 2014 (6 April 2016 for existing customers who don't switch funds/increase regular saving amounts), so there's a risk it could become less appealing for regular savings, although probably not something to lose sleep over.

Read this Q and A at http://www.candidmoney.com/askjustin/874/best-platform-for-regular-fund-isa-saving

Avoid Scottish financial companies in case of independence?

Question
My wife and I live in Wales and are are considering moving our ISA portfolio's from Hargreaves Lansdown to another platform. The favourite choice on cost is Alliance Trust who are domiciled in Scotland but wonder what the implications might be if Scotland became independant. Do you have a view on this?Answer
This is a good question to which I guess no-one knows the answer at this stage. However, assuming Scotland does become independent future then the following issues might be relevant in your case.

Will Scotland have its own financial regulator?
If Scotland has its own version of the Financial Services Conduct Authority (FCA) there's a question whether it'll be effective and whether it will have a complaints system comparable to the Financial Ombudsman Service (FOS). Some might argue it could hardly be worse!

If Scotland has its own regulator it will also need to introduce its own compensation scheme, to replace the Financial Service Compensation Scheme (FSCS). It's unlikely compensation limits would be below those of the FSCS, especially as the £85,000 (€100,000) savings limit is specified by EU law.

Will Scotland have its own version of pensions/ISAs?
Quite possible and there's a chance allowances and tax breaks could differ from those in Britain. It would be confusing, but I doubt there would be anything stopping Alliance Trust Savings and others continuing to offer British tax incentivised products to British customers as well as any new Scottish products to Scottish customers.

Will Scotland have its own currency?
Maybe, but if so I would expect Scottish financial institutions to still accept the British pound, so unlikely to be any change in practical terms.

In practice Scotland makes a lot of money from financial services, including from many customers based in England, Wales and Northern Ireland. So even if independence does go ahead I think it's unlikely Scotland would risk doing anything that would jeopardise this custom. We can never say never, as politicians don't always make the smartest of decisions, but I don't think the possibility of independence is currently a reason to avoid Scottish financial providers.

Read this Q and A at http://www.candidmoney.com/askjustin/871/avoid-scottish-financial-companies-in-case-of-independence

Shold I use Bestinvest Select SIPP or other?

Question
I've got ISA (FundsNetwork/Cofunds) and a SIPP (FundsNetwork/Std Life - £100k) through BestInvest and a SIPP (ex Prot Rights - £50k) with HL. Didn't want to put everything in one pot! I've received a letter from BI saying that from 15/04 following RDR, Std Life has decided not to deal execution only or with self directed clients such as BI.

BI has been making me aware of their Select SIPP / ISA offerings - it looks too good to be true - and there must be some negatives to balance the positives when comparing FN with the Select products - possibly some of the charges outlined here: http://www.candidmoney.com/articles/268/beware-fund-platform-exit-charges

I've been with BI for many years and do like their approach /research. HL is OK, but I've had to move out of trackers to avoid platform charges. I only hold funds.

What do I do with my SIPPs? Just stay with FN without BI? Merge them both in the BI Select SIPP? Move one or more to another provider and forgo the research and guidance BI provides to build a balanced portfolio? It would be great if there was a website that allowed asset allocation, geo split etc to be defined and then from a list of user specified funds it would say "You can achieve this by X% of fund Y " but I've not found any. Answer
In general the Bestinvest Select SIPP costs less overall than Hargreaves Lansdown (HL) Vantage SIPP for a typical portfolio, although this does obviously depend on the specific funds held and amounts involved. This is thanks to Bestinvest giving, on average, slightly higher trail commission rebates than HL (as well as lower share dealing charges)..

Unfortunately, I can't include HL on my comparefundplatforms website as they refuse to send me the required data (including rebate percentages for each fund), otherwise it would be very easy for you run a quick comparison based on the investments you hold.

The main difference between the Bestinvest Select SIPP and FundsNetwork SIPP via Bestinvest is trail commission rebates, Bestinvest pays them on its SIPP but not FudnssNetwork's. But you're right to point out that exit charges on the Bestinvest SIPP are usually higher than FundsNetwork's if you want to transfer funds 'as is' to another platform in future.

If there's a flaw with the Bestinvest Select SIPP it's simply that there are lower cost SIPPs in the marketplace, especially if you hold funds. For example, Interactive Investor, Sippdeal and Alliance Trust Savings should all likely prove cheaper in your scenario. However, none of these companies has independent research or tools to match Bestinvest's, so it's a case of judging whether such factors are worth the extra cost.

The usual rationale for splitting a SIPP between more than one provider is to ensure greater coverage under the Financial Services Compensation Scheme (FSCS), which only provides up to £50,000 cover per provider (although underlying investments might be separately covered). However, given your SIPP monies are ring-fenced from the provider itself the main risk is fraud, which is unlikely. So I wouldn't lose too much sleep over combining both pots with one reputable provider.

Your asset allocation website is a good idea and certainly possible. I hope one day to put something together along those lines, but since it requires buying in a lot of expensive data (i.e. fund holdings) and would take a considerable amount of my time to build I'm afraid it'll likely remain on the backburner for some time yet.

Read this Q and A at http://www.candidmoney.com/askjustin/870/shold-i-use-bestinvest-select-sipp-or-other

Guide to IFAs?

Question
Do you have a guide to IFAs, and do you rank them by performance/fees/any other criteria? Answer
I'm afraid not, for the simple reason it would be incredibly difficult to compile.

The first hurdle is that most IFAs don't publicly publish their fees. Most proclaim they offer good value for money, but don't disclose fees on their website - which I think is telling in itself.

The second hurdle is that it's nigh on impossible to compare IFA investment performance. Firstly, I don't know of any IFAs that publish such data and secondly it would be very hard to compare like for like in any case, as portfolios can vary widely depending on client needs.

Quality of advice is a very important factor, but again hard to measure unless an impartial observer carries out a 'mystery' shop by going through the advice process with a large number of IFAs, which would prove very time consuming.

And the other main hurdle is measuring on going service which, in most cases, is very important.

Existing clients tend to be the best source of feedback about an IFA, but even this can be haphazard. I've lost count of the individuals I've encountered who think their adviser is great (usually because he/she appears a nice/friendly person) but have been ruthlessly taken for a ride with poor quality/expensive advice that's immediately apparent to a trained eye.

A website called vouchedfor is trying to make finding a good IFA easier by acting as a portal for client reviews. However, the number of advisers participating is currently small and since I couldn't find any negative reviews it all seems a bit one-sided. But then maybe that's not surprising, vouchedfor makes money by selling leads to IFAs, so it's in neither the site's nor IFAs' interests to publish negative reviews. Plus, as mentioned above, clients (with respect) are not always the best judge of the quality of advice they've received.

Sorry for the negative answer - but trying to find a decent IFA is sadly still something of a lottery...

Read this Q and A at http://www.candidmoney.com/askjustin/869/guide-to-ifas

Should I wait before moving to a cheaper plaform?

Question
I'm thinking of moving from my existing fund supermarket due to high charges (as discovered on your excellent comparefundplatforms web site) but I would like clarification on the impact of the RDR on trail commissions.

Most fund supermarket rebates appear to come from refunds of part of the trail commission, but if these are being phased out, are the results of your comparison service still applicable for both new and existing investments?

I had understood that trail commission could only now be paid on existing holdings. What happens if I switch fund supermarket and/or the actual investments (Unit Trusts OEICS etc) will I still benefit from refunds of trail commission if no new money is involved?

I understand that all trail commissions could be banned from next year (2014) Could this mean that the fund supermarkets will have to start charging for their services instead of paying rebates? or move everyone to "clean" versions of funds?

I'm concerned that if I switch fund supermarkets now and incur exit charges, the market could change considerably within a year with the end of trail commissions and today's "best buy" supermarket could be tomorrow's dog and cost me switching charges yet again.

Am I correct in my understanding of the impact of the RDR?Answer
You're right to be concerned as a lot could change over the next year. A simple commission ban timeline is as follows:

31 December 2012 - commission banned for new investments where financial advice given.

6 April 2014 - commission will be banned for new investments where no advice given (i.e. execution-only).

6 April 2016 - commission will be banned for existing (pre 6 April 2014) investments where no advice given, although switching funds meanwhile will immediately trigger the ban.

So all those fund platforms/supermarkets/discount brokers who currently receive trail commission will have to 'come clean' by next April and charge explicit fees while using 'clean' funds without commission or platform fees built in.

A few platforms already offer 'clean' charging, namely Alliance Trust Savings, Charles Stanley Direct and TD Direct Investing, which gives a reasonable idea of what others may end up looking like - although there's no guarantee these three won't change their charges (for better or worse) in future.

If you face significant exit charges and the platform you wish to move to has yet to offer clean charging then yes, it could make sense to wait until more platforms have announced their new charging structure. Although in general if a platform is uncompetitive now I doubt much will change under the new regime - they're unlikely to want to reduce their profit margin by much, if anything.

What might confuse things in a 'clean' world is if some platforms can negotiate cheaper 'clean' funds than others, as you'll need to look at specific funds as well as platform charges much like at present.

My fund platform comparison website will continue to show costs for new investments. At the moment this obviously includes most existing investments too. As you point out we could go through a period where platforms offer different prices for new versus existing investments. It might prove too complex to build this into the comparison, but rest assured I'll certainly be analysing and writing about the new charges when introduced by each platform - with a view on whether you're generally better off under old or new.

Read this Q and A at http://www.candidmoney.com/askjustin/868/should-i-wait-before-moving-to-a-cheaper-plaform

Troy Trojan fund or Personal Assets investment trust?

Question
I have £20,000 invested in the Troy Trojan fund and am considering switching my holdings to the Personal Assets investment trust, which is run by the same fund manager. What would the advantages or disadvantages of doing this?Answer
The fundamental difference between unit and investment trusts is that the latter are 'closed funds' listed on the stock market which can borrow money to invest.

If you invest in a unit trust the manager can create extra units to satisfy demand. But if you invest in an investment trust the manager can't create new shares, so you have to buy them on the open market at a price which might be higher or lower than the actual value of the underlying investments held. If the price paid is higher than the true value the trust is said to be trading at a 'premium' and if lower trading at a 'discount'. In simple terms a trust might trade at a premium when there are more buyers than sellers and a discount when the reverse is true. This may work for or against you over time, but arguably increases risk versus a unit trust

If an investment trust borrows money to invest (often called 'gearing') you'd generally expect it to do better than otherwise in rising markets and worse in falling - i.e. it again increases risk.

So back to your question:

Troy Trojan is a unit trust and Personal Assets an investment trust. The manager, Sebastian Lyon runs both funds in a similar way (he was appointed manager of Personal Assets in March 2009), so let's assume there's no advantage to using one or the other in this respect. Since Personal Assets doesn't borrow money to invest there's no gearing, so again no difference to Troy Trojan. Personal Assets is, at the time of writing, trading at a 1.5% premium - so you're arguably paying 1.5% more than Troy Trojan, but this is relatively minor in the scheme of things.

Moving onto charges, Personal Assets annual charges total 1.01% (total expense ratio) while the same figure for Troy Trojan is 1.09% - there's very little in it.

Looking at past performance Personal Assets has returned +8.3% over 1 year and +29.7% over 3 years, Troy Trojan is +6.2% and +24.1% over the same periods.

Personal Assets has likely delivered higher returns due to a combination of slightly different portfolios and movements in share price relative to true underlying value (i.e. the premium/discount stuff outlined above).

I really wouldn't have a strong preference to use one over the other.

On a practical level the investment trust will incur share dealing costs, so maybe less appealing if you subsequently wanted to make regular investments.

But then the investment trust might be more liquid in a worst case scenario. If the fund bombs and most investors want to sell, the unit trust might suspend redemptions until it can shift underlying investments to meet those redemptions - whereas you can sell the investment trust shares on the open market, albeit the price you're offered might be very low (i.e. a big discount to underlying value).

Maybe the more realistic risk with the investment trust is that a period of poor performance could push the share price to a discount (potentially losing you money versus the unit trust if you sell), although the reverse may be true if performance is strong.

Read this Q and A at http://www.candidmoney.com/askjustin/867/troy-trojan-fund-or-personal-assets-investment-trust

Better deal on Henderson Cirillium fund I've been sold?

Question
I have invested in two ISA's this financial year (£22,280 x 2) and a SIPP (£32000). All went into the Henderson Cirilium Balanced I Acc, on advise from my IFA. I was a bit alarmed at the costs (ISA .75% on going annual charge in addition to a £564 initial charge!!) I've yet to discover the charges on the SIPP. I have a further £120k to invest next financial year.

I'd like to keep the money spent to date in the Cirilum fund, at this stage, given he's now told me about a further 3% exit charge! Can I move these to another platform (iii / Alliance / R Plan?) where all subsequent charges can be rebated? I can do my own research and intend to move the additional £120k into more ISA's in subsequent financial years.Answer
Henderson Cirillium funds are sold through a company called Intrinsic Financial Services, which is effectively a network of financial advisers. Performance of the balanced fund has actually been quite good to date, but I'm always wary when independent advisers have arrangements like this, as it arguably jeopardises independence.

I would also be concerned that your IFA has recommended putting your (fairly significant amount of) money into a single fund of funds. It smacks of laziness and/or lack of investment expertise.

Since the Henderson Cirilliun Balanced fund invests in a range of other funds, you're paying two sets of annual charges, the 0.75% charged by Henderson and whatever the underlying funds charge - the net result being a 1.24% total annual charge (according to Henderson's prospectus). Add on any annual fees charged by your adviser and fund platform (if used) and it wouldn't surprise me if the total annual cost tops 2%, which is steep.

As for the 3% exit charge, that's very surprising. It doesn't relate to the Henderson fund itself, so I can only assume it's levied by the adviser or investment platform (if used) - either way it's a rip-off!

Because Henderson Cirilliun funds are sold via Intrinsic, they're not available on mainstream direct to public fund platforms (e.g. iii/ATS/rPlan etc), so sadly I think you'll struggle to move the Henderson fund 'as is' elsewhere. In any case, I suspect the 3% exit charge would still apply even if you could since it's levied by the adviser/platform, not Henderson.

Before you do anything else, I'd suggest getting a clear breakdown of how much you're paying and to whom. If the adviser didn't disclose this to you in writing pre-sale then you'll have grounds for complaint - which potentially might help you negotiate getting out without an exit penalty. If the costs were fully disclosed before you invested and the advice appropriate then you're probably stuck, unless you pay the 3% fee.

A timely reminder that it always pays to check exactly how much you'll be charged in total before proceeding with financial advice.

Read this Q and A at http://www.candidmoney.com/askjustin/865/better-deal-on-henderson-cirillium-fund-ive-been-sold

Good financial dictionary?

Question
Can you please recommend any books that act as financial dictionaries, with definitions of the various terms used in investments, pensions, etc? I'm new to learning about this whole area, and would like a print (rather than web-based) glossary so that every time I meet a word or phrase I don't fully understand, I can simply look it up, and also browse through it during spare time.

I did a search online but wasn't sure which publication would be best, and I know from my own field of psychology that the quality of these kinds of books can vary wildly, so hope you might have some tips.Answer
I'm afraid I'm probably not the best person to ask as I haven't used such books. I just tended to have picked up things as I've gone along, supplemented by web searches when stuck on a particular piece of jargon!

However, having looked at what's available (there isn't much) the Oxford Dictionary of Finance and Banking seems a good choice. While it falls a little short in some aspects of personal finance, it should give you a good overall grounding in the immense about of jargon used in the financial world.

I know you specifically requested a print reference, but you might find the jargon section on this site a handy backup.

Read this Q and A at http://www.candidmoney.com/askjustin/866/good-financial-dictionary

Soaring stock markets in the face of stagnant economies

You'd expect stock markets to reflect the relatively troubled economic outlook, so why are they flying high?.

I covered the same issue over 2 years ago here and in most respects my answer is unchanged. But with the US S&P 500 stock market index hitting an all-time last week and the FTSE 100 breaking 6,600 for the first time since 2007, now seems an appropriate time to revisit.

Of course, we should be happy that stock markets are rising. But with dark clouds and the threat of recession still hanging over many Western economies, you're not alone if wondering why stock markets are so buoyant. Are markets being overly optimistic? Do they know something we don't? Or do they just not care about economies?

Let's look at the reasons I gave last time for being positive or negative about the big picture:

Reasons to be optimistic

Most economies are out of recession - this remains true, although Western economic growth remains far from convincing. And the Eurozone is still arguably in a very fragile state (with Germany effectively bankrolling weaker states).

Corporate profits are generally positive - again still true, largely thanks to a combination of leaner companies (due to belt tightening during recessions) and reasonable demand as some economies post modest growth. Nevertheless, there are still companies going to the wall - especially those with outdated business models (e.g. some retailers).

Central banks may boost economies - this has happened on a massive scale and is arguably the single biggest factor driving markets upwards - as much of the money Banks have pumped into economies has been invested in markets rather than being spent by consumers. The amounts that central banks have pumped (or have pledged to pump) into economies since the onset of the credit crunch (c2008) are colossal - US $2.34 trillion, UK £375 billion, Japan $816 billion.

Dividend yields attractive - is still very much the case. The FTSE 100 average yield is around 3.3% net of basic rate tax (with some companies yielding well over 5%), which compares favourably to gilts at around 1-3% before deduction of tax. Some argue that shares are therefore undervalued, although you could also argue that gilts are overvalued (partly resulting from the Bank of England driving up gilt prices by pumping money into the economy via gilt purchases).

Interest rates look set to remain low - yet again, still true. This is generally good news for stock markets as it makes it cheaper for companies and consumers to borrow, which leads to more spending. Low interest rates on savings also encourages more people to buy shares rather than save.

Reasons to be worried

The impact from tax rises and spending cuts has yet to be felt - while they've started to filter through to the real world, spending cuts and tax rises could still have some way to go yet. The key is the impact this has on consumer spending, hence company results and stock markets.

Economies are still struggling - still true. While most developed economies are now out of recession, they're far from firing on all cylinders. Things are finely poised and it won't take much bad news to send some economies straight back into recession.

Unemployment troubles - have generally eased, for now at least. In fact falling US unemployment appears to be a key driver behind the recent S&P 500 surge.

Emerging markets still depend on developed - again still true. Growing prosperity in emerging markets means companies in these markets increasingly benefit from domestic demand, but they still rely on exports. If Western consumers are hurting from higher taxes and unemployment they'll probably buy less, hurting emerging stock markets in turn.

Will the upturn will last?

Although my pessimism last time proved right for a while, stock markets have subsequently risen overall which I guess proves me wrong - to date at least.

However, I remain nervous and unconvinced the recent upturn is here to stay. I believe the key remains whether the massive amounts of money central banks have injected into economies prove the catalyst for sustained economic recovery and not just a short term blip. There have recently been a few encouraging signs (e.g. falling US unemployment), but not enough to be confident we've finally turned the corner.

So while I think stock markets remain a good long term home for investments, I won't be placing any bets short term.

However, the pertinent question remains:

Are stock markets divorced from economies?

There have been a lot of contrasting views on this of late. The most sensible I've read is from an economist called Roger Farmer, who describes the stock market and economy as like "two staggering drunks connected by a long rope. Sometimes the stock market and the economy go in the same direction, sometimes not. But tied together as they are, they can never get too far apart".

Read this article at http://www.candidmoney.com/articles/271/soaring-stock-markets-in-the-face-of-stagnant-economies