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Charterhouse

Discount Brokers

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What's the ken?

I have my cash (as I've mentioned before) with Fidelity Funds Supermarket. That means I keep all my accounts and various investments in one place which is very easy to deal with. However I was looking at some non-Fidelity funds the other day and some of them have initial charges of up to 5%. A client told me I can get most of those fees refunded if I do the trade via a discount broker.

How does it work?

Basically I pay the discount broker a fixed fee of £20 per plan (so about 0.3% on 7,200), and when the broker receives the 5% (or whatever) commission, he reinvests it into the plan. So I actually get 7,200 into my plan instead of £6,840. In addition every year, the broker takes the per year commission (usually about 1% a year) and keeps £10 of it, and reinvests the rest for you. If the commission is less than £10 he does not charge you more, just keeps it.

Why does it work?

Because the discount broker does not offer advice so has very low overhead costs. He attempts to do high volumes and charge a fixed fee which allows him to still make money.

Where's the catch?

Well that's exactly it, I'm looking for one. So far this seems amazing for ISAs and even more amazing for more commission heavy products such as life assurance, with-profits bonds etc etc

Anyone know where the catch is or is this as good as it looks?

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What's the ken?

I have my cash (as I've mentioned before) with Fidelity Funds Supermarket. That means I keep all my accounts and various investments in one place which is very easy to deal with. However I was looking at some non-Fidelity funds the other day and some of them have initial charges of up to 5%. A client told me I can get most of those fees refunded if I do the trade via a discount broker.

How does it work?

Basically I pay the discount broker a fixed fee of £20 per plan (so about 0.3% on 7,200), and when the broker receives the 5% (or whatever) commission, he reinvests it into the plan. So I actually get 7,200 into my plan instead of £6,840. In addition every year, the broker takes the per year commission (usually about 1% a year) and keeps £10 of it, and reinvests the rest for you. If the commission is less than £10 he does not charge you more, just keeps it.

Why does it work?

Because the discount broker does not offer advice so has very low overhead costs. He attempts to do high volumes and charge a fixed fee which allows him to still make money.

Where's the catch?

Well that's exactly it, I'm looking for one. So far this seems amazing for ISAs and even more amazing for more commission heavy products such as life assurance, with-profits bonds etc etc

Anyone know where the catch is or is this as good as it looks?

Charterhouse, I'm feeling lazy today so I wont answer your questions - except to say it is as good as it looks

Hargreaves Landsdowne are big in this area I know, but I personally use Alliance Trust Savings (who refund nearly all initial and trail commission that would go to advisors and have Vanguard funds)

Its just a heinous example of how much "salesmen" dressed up as "financial advisors" manage to rip people off

The only catch is you have to your own advice :P

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Charterhouse, I'm feeling lazy today so I wont answer your questions - except to say it is as good as it looks

Hargreaves Landsdowne are big in this area I know, but I personally use Alliance Trust Savings (who refund nearly all initial and trail commission that would go to advisors and have Vanguard funds)

Its just a heinous example of how much "salesmen" dressed up as "financial advisors" manage to rip people off

The only catch is you have to your own advice :P

I do that last bit anyway, but at the moment apparently Fidelity just trap all the commission and keep it, as I am self-advised.

The guys I am looking at is Cavendish Online.

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I do that last bit anyway, but at the moment apparently Fidelity just trap all the commission and keep it, as I am self-advised.

The guys I am looking at is Cavendish Online.

yes thats the scandal of buying UTs directly

I guess the UT companies that want investors (apart from Vanguard) dont want to bite the IFA hand that feeds them clients

A bit like companies and investment banks, eh? ;)

Never heard of Cavendish, but since the fund manager probably chooses the custodian, I guess it doesnt matter who it is...

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