Oaklands Details

0121 355 4455
info@oaklandswealth.com
12A Duke Street
Sutton Coldfield
West Midlands
B72 1RJ

Oaklands Wealth Management Ltd

The cost of Independent Financial Advice varies widely and depends on a number of factors:

Who sets the fees?

 It is entirely up to IFAs how much they charge for their service.

 Let’s start by clarifying what advice costs are involved in using a financial advisor.

IFAs have 2 sets of fees – an INITIAL FEE at the outset for the analysis and advice and then an ONGOING FEE for the continuing service offered.

The regulator – The Financial Conduct Authority (FCA) carried out a Retail Distribution Review (RDR) and Financial Advice Market Review (FAMR) the results of which were published in December 2020.

The FCA found that 80% of ongoing services were based around three price points, split between 0.5%, 0.75% and 1%. The average charge for ongoing advice the FCA found was 0.8% across all the firms.

For initial advice, the average fee to a new client was 2.4%.

The advisors’ fees are not the only cost however to investing. Read on to get the full picture.

Fund Management fees

In addition to the advisor’s fee there will be charges for the investments used.

A fund manager and his/her team are responsible for selecting either:

  • shares for equity funds,

or

  •  fixed interest, gilts and corporate bonds for Corporate, Strategic and Distribution bond funds.

The fund they manage has to achieve pre-determined criteria set by the Investment Management Association (IMA) for it to appear in a relevant asset class.

The Investment Management Association is the trade body for investment management firms, they have 250 member firms who between manage £8.5 trillion in UK and around the world.

Below is their criteria for a UK Equity Income Fund

UK Equity Income

Funds which invest at least 80% in UK equities and which intend to achieve a historic yield on the distributable income in excess of 100% of the FTSE All Share yield at the fund’s year end on a 3 year rolling basis and 90% on an annual basis.

The selection of shares or financial instruments will depend on each fund manager’s unique style and what their preferences are for investing.

You can have a number of funds in one sector, for example the UK Equity Sector, though each one will have a different number of shares within it and will be very different to its peers within that group because of the approach of the fund manager.

Many fund managers have an accountancy background and have to be very forensic in their approach to looking at companies before they invest. Often the fund managers will be invited into organisations to ‘look under the bonnet’ to understand how they operate and to ascertain what their prospects are for future returns.

For equity investments fund managers will be constantly reviewing the results of the company they have invested in to make sure they are delivering the anticipated returns.

They will make critical decisions along the way as to whether to sell some or all of their investment or holding in a company, or whether to invest more.

For Corporate bond style funds, the fund manager will be looking over the term of the investment to ensure the yield will be paid over that term. They need to ensure there is adequate financial security to make sure the yield will be paid every year.  Once they have committed to this type of investment, which can range anywhere from 5 to 30 years, they do not want the yield payment to fail.

The fund manager charges vary from fund to fund with typically equity funds ranging from 0.80% to 1.36% per annum and Bond style funds between 0.11% to 0.67%.

Product Platform fees

A platform such as AJ Bell or Transact provides clients with the appropriate tax wrapper for their investments.

This could be a unit trust, ISA, Personal Pension or SIPP.

They accept transfer payments from other pensions or ISAs or Unit Trusts, and payments from clients.

For pensions and SIPPs they collect any tax relief from HMRC and credit this to the client pension.

When clients take payments from their pension they are paid via a PAYE system, which means they deal with any tax payments to HMRC and pay the client the nett income payment.

For pensions, they provide a trust structure so the pension does not form part of the policyholder’s estate and enables the pension owner to nominate who they would like to pay their pension to in the event of their death.

The platform enables the client to have a selection of funds which can be changed accordingly. The instruction to buy funds and switch funds is accepted from the adviser.

Platform fees are around 0.27% for their overall service.

The platform makes no investment decisions.

Check your prospective advisor’s fees

A recent survey by the FCA revealed that a surprisingly low number of advice firms published their fees on their website. Under their ‘Treating Customers Fairly’ guidance all clients should be charged the same fee for the category of investment they receive.

Despite this some firms indicate a range of fees without stating the exact level of fee.

You don’t need me to advise that if a firm’s fees are not transparent at the outset it’s difficult to assess how fairly they are treating their customers. Are some getting special deals?

Here’s how my firm sets out our fees.

https://oaklandswealth.com/fees/

Interested in finding out more?

Seeking a second opinion on your financial future costs you nothing.

Simply call our friendly team on 0121 355 4455 or drop us an email to

appointments@oaklandswealth.com to arrange a confidential chat.

Oaklands Wealth Management, founded by Helen Blackburn in 2004 advises

clients around the Midlands on retirement planning, pensions & investments.

Her firm holds British Standard BS 8577 for client service & investment process.

Minimum investment is £500,000 (£650,000 for pension transfers).

IMAGINE YOUR PENSION & SAVINGS 100% UNDER CONTROL…
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