What is a Discount Broker?
Discount brokers enable you to buy funds at a cheaper rate than if you had bought directly from the provider or after having received advice from a financial adviser. Costs are lower because we automate the buying process whether you require advice or not. For example, where an investment bond is bought without advice, we will rebate all the initial commission back into your investment to enhance the terms. This can be as much as 7% so this makes a huge difference to the charging structure of your investment bond.
Can you explain the difference between commission and adviser charging?
Commission is a payment from an investment bond provider to an authorised financial advice company. Changes were brought about in January 2013 which stopped commission payments for advised business. However, commission still continues for non advised business. For advised business, commission has been replaced with “Adviser Charging” where the investor agrees a fee with the adviser and this is paid by the provider of the investment bond to the financial adviser.
There are two main types of commission paid to the financial adviser from the product provider: initial commission which is paid as a lump sum and is typically a percentage of the investment and renewal commission (sometimes referred to as “trail commission”) which is paid on a regular basis (often monthly) and is usually a percentage of the funds under management.
Adviser Charging often takes a similar form to commission where a percentage of the amount to be invested is paid from the investment bond provider to the financial adviser as an upfront lump sum and a regular percentage of the investment is also paid by the bond provider to the financial adviser.
Axxis does not charge any upfront fees or commission and takes a reduced regular payment of 0.25% per annum of the amount invested.
What would happen if the investment bond provider became insolvent?
If the bond is based in the UK, you would be covered by the Financial Services Compensation Scheme. Investment Bonds are categorised as insurance business and the compensation limits are 90% of the claim with no upper limit. For more on this, please refer to the FSCS website on compensation limits.
What are the implications of purchasing an investment bond without advice?
Your statutory rights to would be adversely affected if you chose not to receive advice. This would mean if you had reason to complain to the Financial Ombudsman Service having chosen not to receive advice you would be held responsible for the investment decisions you have made.
What is the difference between buying an investment bond on an “execution only”, “information only” or an “advised” basis?
“Execution only” is where an investor instructs a broker to purchase a particular type of investment with no advice given. “Information only” is where an investment is purchased with no advice but information has been provided to the investor- for instance, information about the charging structure or the funds available. An “Advised” basis is where the investor has requested advice be given as to which investment bond to take out and which funds to invest in. For “advised” cases we will limit the advice to the purchase of an investment bond – unless you instruct us to the contrary.
We offer both “information only” purchases or “advised” purchases. Some investment bond providers will only accept application forms where advice has been given.
Can I use different fund managers with an investment bond?
Many investment bond providers offer access to externally managed funds within the product so it is more than possible to spread the risk and diversify the asset allocation. Within most investment bonds you can switch funds and choose who you wish to manage your investment.
If I buy an investment bond through you, will you become my financial adviser?
We will only assist you with the investment bond– unless you ask us to advise you on other areas of financial planning.
I don’t want advice but your “Help Me Buy” module will not allow me to buy an investment bond without advice. Why is this?
Some investment bond providers will only accept an application form if advice has been given. Hence our “help me buy” module will not allow you to proceed unless an “information only” purchase is possible.
How long does the process of buying an investment bond take?
If you have opted for advice, we usually produce our written report containing advice within 2-4 working days following receipt of the Investment_Bond_Suitability_Questionnaire. If you decide to proceed you will need to complete an application form and send it to us. We will process this on the same day as receipt and then forward to the product provider. We also complete a Money Laundering check on you. If you pay by cheque then this needs to clear into the bank account of the investment bond provider before the investment is made. Original policy documents will be sent to you and we will retain a copy.
What is included in the 0.25% per annum you receive?
The list below shows what services are included in the 0.25% per annum paid to us:
- Chargeable Event Calculations
- Fund switches
- Turning on or off the 5% withdrawals
- Assigning bonds to a spouse or other party
- Investment reviews when requested