Your clients need to know what they’re paying for and how much they will pay. Both financial advisers and Old Mutual International are obliged to make this clear.
Initial charges and ongoing charges may be taken directly as a deduction from your clients’ payments (or ‘premiums’) – or indirectly, as a deduction from the investment growth of the funds they have chosen to invest in. The charges are used to pay:
- you – for your advice
- us – Old Mutual International
- the fund managers who manage the funds their contract is invested in.
Charges are detailed in the Illustration that you can give your clients before they apply for a product or service.
Different charging structures for different products
Every Old Mutual International product or contract has a slightly different charging structure depending on its make-up.You need to explain these clearly.
Many of our products/services have initial charges, and the amount will vary from product to product, and according to the payment structure your clients have agreed with you. They may agree for you to provide services in return for a cash payment, or for you to take payment for those services by accepting commission payments from us.
Product or service charges made by us help to cover the cost of these commission payments. These charges also contribute towards our costs of setting up the product, our overheads and profit. Any commission payments from the product may have to be disclosed by you, to your clients.
Ongoing charges include any annual charges made by us to manage the product(s) your clients have bought from us and to cover the costs of paying any agreed commission to you. Unless they have made an agreement with you to pay directly for the advice you give, that commission is paid by us, out of the charges we make to their product.
Fund managers charge for their costs within the pricing of the funds invested in. These charges and costs vary depending on the nature of the fund and the assets it invests in. Some funds have higher charges than others, because, for example, they rely on particular investment expertise and extensive research.
Don’t forget other possible charges
You should also consider any other actual or potential costs when considering particular investments. There may be additional costs for cashing the investment in early, for switching funds, and so on. The ongoing costs of maintaining the client’s long-term savings can be a significant factor in the return they get.