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Could we save fees if we invested in certain funds directly?

17 August 2021

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Question by James

We have multiple funds (we being 2 of us) via an independent advisor and all 23 funds are with Fidelity. It’s a mix of investment Isas and my two pensions; a joint investment account for our grandkids (if they behave !!!).

My question is could we save fees if we just copied by direct investing in certain funds direct? Is that a legitimate discussion to be had as many (maybe 15) of our funds are shared? I.e. we both have money in the same funds
Any thoughts welcome.

Regards,
James


Answered by James Greenly

Hi James

Thank you for your question.

All the above 'tax wrappers' are with Fidelity, most likely held via their Platform as you're using an IFA. It sounds like the IFA is using similar funds across the various tax wrappers as he/she feels that those particular funds are the most appropriate for you, given your risk appetite, financial situation, financial objective and investment time horizon. It's not uncommon to have the same funds in different tax wrappers - in fact I would say it is a good thing, most of the time.

Funds typically have a 'Ongoing Charges Figure' - which is the cost of the fund itself. If you were to hold the same fund in say an ISA, a Pension and an Investment Portfolio, the same OCF would typically apply.

Your actual question is, "could we save fees if we just copied by investing in certain funds direct?" - Possibly, is my answer. Although let's remember that you have money in ISAs and Pensions - if you were to take this money out and try and invest in the funds direct, you would be moving money out of extremely tax-efficient accounts, and with the pension would almost certainly suffer income tax. You would also need to find a way of actually buying those funds. If your adviser is charging you a percentage of your money, then if you were to withdraw the funds and invest direct, you would 'save' on the cost of their fees. You need to consider all the other work that is being done (or not done) by your adviser though - I would hope that the fees you are paying your adviser are more of an investment than a cost (however you'll have to be the judge of that!).

It seems to me like there may be a little bit of confusion as to why you're holding so many funds, and why 15 of those funds are 'shared'. I would first of all ask your adviser to explain to you what the overall investment approach is for your money, and why. My hope is they will be able to reassure you that there is valid reason for owning so many funds. The funds you own in your ISAs, Pensions and grandkids account should all link back to your goals and objectives.

Don't be afraid to ask these questions. A big part of an advisers job is to help educate their clients so that they feel comfortable with the approach that is being taken with their money.

I hope that helps to answer your question.

Best wishes

James

Answered by

James Greenly

Chartered Financial Planner

I am a Chartered Financial Planner at Capital Asset Management, a boutique financial planning and wealth management firm based in the City of London.