In the second blog in this series we'll compare ISACO’s investment charges with those of a typical financial adviser.
Most advisers who offer ongoing advice or guidance for ISA and SIPP investments will bill their clients a fee charged each year, calculated as a percentage of their account value. Extra additional charges are sometimes added and the net result is that the client pays about 2% of their portfolio value per year in fees.
By contrast, ISACO charge a small one off fee of £2,995 in year one which is waivered for future years. We also charge a small service fee calculated as a percentage of your portfolio. For example, clients who have £250,000 or more, the service fee is 1%. This slight difference in fee charges could save you tens of thousands of pounds and those savings could be added to your investment account to help boost your returns. For example a 1% annual fee charged on a £250,000 portfolio is £2,500, However if you get charged 2% annually, the fee is £5,000, a 100% increase!
ISACO versus an adviser
Let’s look at a performance and fees comparison of ISACO versus an adviser charging 2% per year in fees over a ten year time span. In our example we'll use an individual with a £250,000 portfolio.
Adviser
| Year | Capital start of year before fee taken (£) | 2% annual fee (£) | Amount after fee (£) | Capital growth aim | Capital value end of year (£) | Cash flow at 5% |
| 1 | 250,000 | 5,000 | 245,000 | 7% | 262,150 | N/A |
| 2 | 262,150 | 5,243 | 256,907 | 7% | 274,890 | N/A |
| 3 | 274,890 | 5,498 | 269,392 | 7% | 288,249 | N/A |
| 4 | 288,249 | 5,765 | 282,484 | 7% | 302,258 | N/A |
| 5 | 302,258 | 6,045 | 296,213 | 7% | 316,948 | N/A |
| 6 | 316,948 | 6,339 | 310,609 | 7% | 332,351 | N/A |
| 7 | 332,351 | 6,647 | 325,704 | 7% | 348,503 | N/A |
| 8 | 348,503 | 6,970 | 341,533 | 7% | 365,440 | N/A |
| 9 | 365,440 | 7,308 | 358,132 | 7% | 383,201 | N/A |
| 10 | 383,201 | 7,664 | 375,537 | 7% | 401,824 | £20,091 |
For illustrative purposes only
ISACO
| Year | Capital start of year before fee taken (£) | Initial fee (£) | Service fee (£) (1%) | Amount after fee (£) | Capital growth aim | Capital value end of year (£) | Cash flow at 5% |
| 1 | 250,000 | 2,995 | 2,500 | 244,505 | 12% | 273,846 | N/A |
| 2 | 273,846 | 0 | 2,738 | 271,108 | 12% | 303,641 | N/A |
| 3 | 303,641 | 0 | 3,036 | 300,605 | 12% | 336,678 | N/A |
| 4 | 336,678 | 0 | 3,367 | 333,311 | 12% | 373,308 | N/A |
| 5 | 373,308 | 0 | 3,733 | 369,575 | 12% | 413,924 | N/A |
| 6 | 413,924 | 0 | 4,139 | 409,785 | 12% | 458,959 | N/A |
| 7 | 458,959 | 0 | 4,590 | 454,369 | 12% | 508,893 | N/A |
| 8 | 508,893 | 0 | 5,089 | 503,804 | 12% | 564,260 | N/A |
| 9 | 564,260 | 0 | 5,642 | 558,618 | 12% | 625,652 | N/A |
| 10 | 625,652 | 0 | 6,256 | 619,396 | 12% | 693,724 | £34,686 |
For illustrative purposes only
10 year comparison ISACO versus an adviser
Lets now take the data from these tables and make some sense of it. Let’s compare some of the criteria that are often most important to our clients.
- Total cost of client fees
- Cost of client fees per year
- Profit made for client over 10 years
- Cumulative gain made over 10 years
- Annual percentage gain after fees
- Annual cash flow generated
10 year performance and fees comparison
| Results | Adviser | ISACO |
| Total cost of client fees | £62,479 | £44,085 |
| Cost of client fees per year | £6,248 | £4,409 |
| Profit made for client | £151,824 | £443,724 |
| Cumulative gain realised | 60.7% | 177.5% |
| Annual % gain after fees | 4.9% | 10.7% |
| Annual cash flow generated* | £20,091 | £34,686 |
*5% annual cash flow
When people see these results, many are shocked. The worst situation an investor can be in is when an adviser charges too much, gives poor service and underperforms the market. In this case the fees the adviser charges are not justified. However the flip side of this is when your adviser charges you a fair fee, with good service and helps you outperform the market. In this scenario the adviser fees are justified. By ISACO adopting a clearer, fairer and more transparent fee structure, the extra profits to be made and savings to be realised can be significant.
In the next post in this series we'll look at this 10 year comparison in more detail.
As always, if you have any questions or thoughts on the points I've covered, please leave a comment below or connect with us @ISACO_ on Twitter.
Please note past performance should not be used as a guide to future performance, which is not guaranteed. Investing in Funds should be considered a long-term investment. The value of the investment can go down as well as up and there is no guarantee that you will get back the amount you originally invested.
About ISACO
ISACO was established in 2001 by brothers Stephen and Paul Sutherland. Our personal investment service allows you to buy the same funds as our star-performing investor. You find out where he invests, keep full control of your account, enjoy a close relationship with a trusted expert, and benefit from the potential for attractive long-term returns.
For more information about ISACO and our personal investment service, please read our free brochure.
