Which 30 year investments for pension?

Question
I don't have a pension and am 33, I have a small amount in a Shares ISA and wanted to use this to build up a retirement fund. Do you have any advice on which shares to invest in for around 30 years? I'm going to try put £200 away each month and top it up with extra money when I can.Answer
The answer largely depends on how much risk you're comfortable taking. If the thought of seeing your investment fall in value will give you sleepless nights, then better to take a more cautious approach. Conversely, if you're quite comfortable with this on the basis you should end up with a decent profit after 30 years you can probably afford to be more adventurous.

If I were taking a bet over 30 years, two areas spring to mind: emerging markets and commodities. The former will very likely continue to outpace lethargic Western economies while commodities should prosper overall thanks to growing global demand and their scarcity.

Of course, it's not that simple. There are plenty of unexpected events that could hit both these investment areas over the next 30 years - so high volatility is more or less a given. But looking at the big picture I struggle to see scenarios that would prevent both these areas delivering good longer term investment returns.

So, if you're comfortable with the risk, I'd be inclined to consider emerging markets and commodity funds. You might offset risk a little by holding a UK equity income fund or shares in large companies paying high dividends. And perhaps include commercial property or corporate bond funds if you want to dial down risk another notch or two.

Good luck!

Read this Q and A at http://www.candidmoney.com/askjustin/799/which-30-year-investments-for-pension

How to get advice for my SIPP?

Question
I have recently sacked my financial adviser and have engaged an Actuary who is helping me to run my SIPP, but cannot give me any advice on investing.

I have not been very impressed with financial advisers and have not got much faith in them, therefore I am having to learn how to invest the money in my SIPP myself. How do I go about getting the best advice? as well as reading your excellent web site.Answer
As it stands, there are three main options open to you:

1. Make investment decisions yourself. Whether this is practical (or wise) depends on how keen you are to get involved, the amount of money in your SIPP and your needs going forwards. For example, investment management might be especially challenging if you're already retired and drawing an income, as your investment strategy would need to avoid the risk of the pension fund running dry. If you take this route use a platform or discount broker who refunds sales commissions (or uses funds without this built in) to cut costs.

2. Use a financial adviser. The adviser will make recommendations to you, most likely funds, with you having the final say on whether to enact them. Financial advisers tend not to be investment specialists, often preferring to recommend funds of funds or outsource to a discretionary manager for larger sums.

3. Delegate to a discretionary manager. This means giving someone full discretion on running your money. You'll agree objectives and the level of risk to be taken, then let them make all day to day investment decisions. Such services tend to invest in funds and shares.

Finding a good investment adviser/discretionary investment manager who provides value for money is sadly very difficult - if I knew a sure fire way of finding one I'd have put details on this site long ago.

The key things to look out for are a good track record at what they do (can the adviser/manager show you examples of the work they've done for other clients?), ability to give a sound explanation of how they decide on the split of different assets and select investments, along with a clear explanation of exactly what you'll pay and the service you'll receive in return.

If the actuary you've engaged is making the decisions on what proportions of your SIPP to invest in different asset classes (i.e. trying to match potential risk/returns to your needs) then the job of investing the money should be somewhat easier, as you'll just need to focus on worthwhile investments in each area. This isn't too difficult provided you're willing to spend some time gauging the better funds for various assets/geographical areas. Taking a straw poll of the funds rated by various research/broker websites wouldn't be a bad start.

Otherwise you may well be better off taking advice, if you can find someone you trust.

Read this Q and A at http://www.candidmoney.com/askjustin/796/how-to-get-advice-for-my-sipp

Change to common law rules?

Question
Do you know whether the laws surrounding common law relationships are likely to change? I understand that at present separated unmarried couples are only entitled to properties in their name or properties they can prove they have paid towards. Thanks. Answer
Common law partners, i.e. those living together who are not married/civil partners, have no automatic right to each other's property, regardless of how long they've lived together.

While it's clear some individuals are probably treated unfairly under the current system, as far as I know there are no plans to change this.

I think change would be unlikely in any case, as trying to enforce common law rights could get very messy. It would likely involve having to prove how long you've lived with someone, which might be straightforward in some circumstances (e.g. a joint rental agreement) but far harder in others (e.g. living rent free in a partner's property).Then there'd probably need to be proof of ownership for assets etc. All this would be great for solicitors to rack up some fees, but maybe less so for the individuals concerned.

Read this Q and A at http://www.candidmoney.com/askjustin/792/change-to-common-law-rules

Can my company invest in shares?

Question
Can I invest my limited companies' monies in equities or property? If yes, are there any specialised brokers/platforms who deal with limited companies? For my own money I currently use Alliance trust savings for Investment Trusts and Hargeaves Lansdown for unit trusts.Answer
Yes, companies can invest in shares and property. However, many low cost stockbrokers and platforms don't offer this facility - Alliance Trust Savings and Hargreaves Lansdown among them.

Barclays Stockbrokers and TD Direct Investing do offer company trading accounts, allowing your company to trade both shares and funds. Just bear in mind that companies don't enjoy capital gains tax allowances. Any gains made from investing will count towards company profits - hence subject to corporation tax.

Read this Q and A at http://www.candidmoney.com/askjustin/791/can-my-company-invest-in-shares

Reclaim commission and look after pension and ISA myself?

Question
Your website is invaluable to a novice such as I, long may it continue.

Now that RDR is here, I'm thinking of moving my investments and kicking my IFA into touch, so I would be grateful for your comments on the following scenario.

I currently have three ISAs collectively worth £23K on Fidelity Funds Network, and a Pension Portfolio of £100K with Scottish Life.

My advisor pockets 0.5% per year commission on both ISA and pension.

I monitor my investments constantly, and consider that I could produce better results by doing it myself now that I'm retired, though I admit I'm a novice.

I'm looking at Interactive Investor or Sippdeal as the platform, and looking to invest in investment trusts rather than unit trusts or pension funds.

My investment horizon is 20 years, but I will want to enter into capped drawdown within the next 2-4 years, before I am 70. My wife is 10 years younger than I, and I would want her to inherit my pension pot when the grim reaper calls for me.

Q1. Does trail commission stop when investments are transferred to another platform?
Q2. If I transfer the three ISAs without converting into cash first, as an in specie transfer, does the trail commission to my IFA stop?
Q3. What is your opinion of Interactive Investor and Sippdeal?
Q4. Should I worry about buying investment trusts at a premium?Answer
Glad to see you taking an active interest in your investments. Assuming you're happy looking after your own financial affairs then yes, you can avoid he trail commission moving forwards. Before I answer your specific questions, a few points to bear in mind.

Scottish Life might levy a penalty if you transfer the pension which, depending on the amount, may influence your decision. Certainly worth checking how much this would be, if applicable, assuming you haven't already.

I wouldn't dismiss unit trusts out of hand. They've often looked more expensive than investment trusts in the past due to unit trusts building sales commissions into their charges. But with RDR prompting the issue of 'clean' unit trust classes and some fund platforms/discount brokers rebating all commissions where still paid, there's generally little difference now (on new investments at least). Investment trusts can borrow money to 'gear' returns and you may benefit or lose from the share price varying from actual underlying value - you might see these as advantages. But on balance I'd pick investments on their merits rather than focus on one specific genre.

As for drawdown, you can certainly do this without an adviser, just keep a close eye on income withdrawals and risk/performance to reduce the chances of your port running dry too soon. Your wife can inherit what's left of your pension under current rules, either taking taxable income or withdrawing a lump sum subject to a 55% tax charge.

On to your questions:

1. Yes. Commission can no longer be paid where advice is given in any case. But if you make the decision yourself (called 'execution-only') then commission can still be paid - if the new platform or discount broker you transact through receives any commission they might rebate some/all of to you depending on their deal.

2. Yes, same as above. Because the provider/platform changes, any arrangements with the IFA will automatically cease.

3. Both Interactive Investor and Sippdeal are sensible platforms, generally offering good value if you want to hold investment trusts. Bestinvest might also be worth a look if you want more in the way of tools and research. Their unit trust rebates aren't usually as high as Interactive Investor, but this won't matter if you only hold investment trusts. I've just launched a fund platform comparison tool at www.comparefundplatforms.com which you might find useful.

4. If it's more than a few percent then arguably yes. You don't want to buy at a 10% premium only to see it slip to a 10% discount over the course of a few years, that's an 18% loss ignoring underlying investment returns. Of course, if a premium remains as high, if not higher, then no problem. These things are hard to predict, but nevertheless, high premiums are obviously caused by high demand, so it's worth trying to understand what's driving the demand - great prospects or hot air?

Hope this helps and good luck!

Read this Q and A at http://www.candidmoney.com/askjustin/795/reclaim-commission-and-look-after-pension-and-isa-myself

How much should an IFA charge?

Question
I have a financial planner and he charges me 3% on all money i invest with him for advice and planning of my investments including my work and private pension. I also invest a sum that goes into various funds each month. I also pay an admin flat fee each year.

The advice thus far seems fine but the fee feels high to me, what is the industry norm for this sort of financila planning?

Answer
Financial adviser fees are in rather a state of flux at the moment, following the sales commission ban from the start of this year. For the first time ever a fair proportion of the population is waking up to fact that financial advice is not 'free', having incorrectly perceived it to be under the commission system.

As a result, many financial advisers are grappling with how much to charge. Too low and they'll go out of business, too high and customers won't want to pay it (which risks going out of business).

The reason I mention all this is that it's still a bit early to work out exactly what a typical fee will be under this new regime. Of course, financial adviser fees have been around for years, but most were just intended to encourage clients to opt for the commission option, so they really weren't that meaningful.

Charging 3% initially and 0.5% a year seems to be popular so far - which (perhaps unsurprisingly) is the rate of commission that was generally paid on fund sales in the past. But then some advisers are asking for at least 3% followed by 1% a year, others an hourly rate and, less commonly, a fixed price, so it's hard to reach a consensus. And just because a certain fee structure is popular, it doesn't necessarily mean its good value.

But however the fee is structured, what really matters is the actual total cost to you in pounds and pence.

A 3% initial charge might seem reasonably fair on a £20,000 investment (i.e. £600). But is it excessive on £100,000 or more (i.e. £3,000+)? Quite possibly, unless the adviser is required to do a humongous amount of work for some reason.

If you think the 3% is steep in your situation, then ask the adviser to either cap the amount or reduce the percentage if you invest over a certain amount. The worst that can happen is they say no.

Finally, while I think many financial advisers do arguably charge too much for the work done, bear in mind that a combination of regulatory incompetence and red tape has pushed up their costs of running a business in recent years. A one man band won't likely get much change from £6,000 after paying the annual regulatory and insurance costs needed to practice as an adviser, possibly double that if paying for external compliance and administration help. Then there's the other (more usual) costs of running a business.

P.S. If any financial advisers are reading this I'd be keen to get your thoughts below. Is my view fair?

Read this Q and A at http://www.candidmoney.com/askjustin/794/how-much-should-an-ifa-charge

Fund platform comparison site launch

Finding the best deals on investment funds can be overwhelming these days, so I decided to build an exciting new tool to help you compare leading fund platforms and discount brokers..

One of the more popular pages on this site is the ISA discount broker comparison, which highlights the potentially significant savings to be made by using discount brokers and fund platforms that rebate commissions when buying funds. However, it's limited in that I've had to assume a static portfolio, that might be very different to yours. So I decided to build a fully dynamic fund platform comparison tool, i.e. type in your funds and compare costs.

Some late nights and cursing at my computer later, it's now ready to use on a new website www.comparefundplatforms.com. It's built, run and owned by me, just like this site, the reason for a separate site being Candid Money is already quite cluttered.

What are fund platforms?

They're administration services that allow you to physically hold your fund investments in one place. So rather than deal with numerous fund managers, you carry out all your transactions with just one company. This means a single valuation and far less paperwork. For a more thorough explanation read the About Fund Platforms section on the new site.

How does the comparison tool work?

Although complex behind the scenes, it's straightforward and fast to use:

1. Choose how you want to hold the funds: directly, ISA or SIPP.


2. Select the funds you wish to compare.


3. Include shares too if you want.


4. Confirm assumptions about investment period and growth rate.


5. View results & save if you wish.

The comparison will show a projected value for each platform after all charges and commission rebates, based on the information you enter. It also includes an equivalent overall annual percentage cost along with details of platform and underlying fund fees.

Why's it necessary?

It used to be pretty easy comparing the cost of buying funds, you'd just need to pick the discount broker that rebated the most sales commission.

However, the advent to fund platforms and the FSA's Retail Distribution Review (RDR) has made things rather more complex, albeit potentially better value.

For starters, some fund platforms have been muscling in on discount brokers, by offering competitive, often market leading, commission rebates direct to the public. In return some discount brokers are posing as platforms, either having built their own or using another company to power the service. The distinction has become quite blurred - I include both in the comparison tool for this reason.

But it's not just a case of how much commission they rebate. Platforms charge fees, increasingly taken directly from customers than via fund charges - these can even extend to dealing charges on funds.

And as a consequence of RDR fund managers now mostly offer commission-free (and sometimes platform fee-free too) versions of their funds, with correspondingly lower charges. Some platforms now use these unit classes but some don't, further clouding the charges issue.

So, for one customer a platform that charges explicit fees with generous rebates could end up being cheaper overall than one that appears' free' on the surface, yet for another customer the reverse might be true. It all depends on the investments you want to hold, how much you invest and how often you'll trade.

Try working all this out manually (which I've done in the past) and you'll soon give up the will to invest (if not live). Hence the need for an accurate and impartial comparison tool.

Which platforms are featured?

To kick off I've included Alliance Trust Savings, Bestinvest, Cavendish Online, Club Finance, Interactive Investor and rPlan. In part because they're generally the most competitive platforms/discount brokers and also because they were willing to provide the necessary fund charges data needed to build the tool. A few more competitive platforms will follow over the coming weeks, making the tool more comprehensive still. At the moment it seems Hargreaves Lansdown won't be joining them - they refused to supply the data.

Take a look

Anyway, rather than me rabbit on, go take a look www.comparefundplatforms.com. I'd be very interested to get feedback on what you think and suggestions for any improvements/features you'd like to see moving forwards - just post below or use the contact us page. And, if you think it's useful, please spread the word!

Read this article at http://www.candidmoney.com/articles/266/fund-platform-comparison-site-launch