ARF charges

By the way, £155 is not a silly number. Interactive Investor are a very profitable business, making a lot of money, whilst charging this.

It seems a silly number to us Irish because we're used to seeing AMC's in the thousands.

We're a smaller economy so our fee should be higher - but not by the margin it is.
 
I have read this thread numerous times and even though I would consider myself quite financially savvy, I'm a bit confused.

I recognise that charges are only a part of the issue and asset allocation is important, but if I could just stick to the charges.

The AMC , split between the two elements that make that up, seems straight forward, but I'm confused about the set up charge.

I have got a quote with an AMC and no set up charge at all. I have queried it and got that confirmed in writing. Can that be possible?
 
Yes. The setup fee can be recouped through a higher AMC, lower advisor commission, or just by the provider taking a lower margin.
 

You can buy an ARF with an AMC and no early exit charges.

You can buy an ARF with an AMC and early exit charges.

Both will have 100% allocation.

If there are early exit charges then there's an initial commission payable to the intermediary, unless you're doing it on a fee basis. There may also be a trail commission, depending on the level of AMC.

Early exits are to protect the product provider so that they can recover the initial commission paid to the intermediary in year one over 4/5 years.

If a client wanted to switch providers ( say they found a cheaper alternative) then the penalty would be imposed on the client but the provider would also claw back some of the initial commission paid to the intermediary.

I suppose it's up to client/intermediary to interpret whether initial commission (with 100% allocation) is a set up 'charge'.
 
Thanks for that.

Basically, if I understand that correctly , the cost of the commission paid from the provider to the intermediary, is one or both of an early exit charge and/or an increase in the AMC.

Where is the cost of an increase in the allocation to excess of 100% ?
 
Best use an example:

ARF €250,000 - Allocation 104% (Gross) and AMC of 1.25% (where 0.25% is trail)

Inretmediary decides to give you 101% allocation so there's 3% initial commission paid (for the advisory service and set-up) and annual servicing is paid for out of the 0.25% trail.

You have early exit charges of 5/4/3/2/1% in years 1//2/3/4/5

Provider recovers the initial commission via the 1% AMC on the (now increased fund value) of €250,000 x 101% (or, more accurately, 1% divided by 12 of whatever the actual value is in any month).
 
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Or you may get 100% gross allocation and 0.65% amc. Any set up fee either comes straight out of your investment or you write a cheque.

I'll let you take a guess on which is better over the lifetime of the policy, 101% allocation and 1.25% amc or 97% allocation and 0.65% amc...
 
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