Fund supermarket guide

Fund supermarkets have delivered efficiencies to investors and advisors in that a whole range of funds from different fund management groups can be purchased from the same place. Transactions are online and most fund supermarkets encourage investors to transact via an independent financial adviser, although there are some that can be found that will deal direct with the investor.

Key benefits of a fund supermarket

• A wide range of funds, from different fund management groups, are available to purchase from the same ‘outlet’;
• You would normally expect to see a choice of at least 1,000 funds;
• Discounts on initial, and sometimes annual charges are often available;
• There is often a wide range of information and research available on these trading platforms to help in the decision-making;
• You can usually view your whole portfolio of funds, online, at any time and with up to date values;
• Rather than statements and regular reports coming from a diverse number of fund management groups, all communications come from the one source;
• Trading takes place online;
• Usually the fund supermarket also facilitates individual savings accounts (ISA) investment, which can be viewed alongside any direct investments.

Charges

The charges you would expect to see quoted for purchasing a fund are as follows:

Initial charge: This charge is imposed by a fund management group to cover administrative and marketing costs, and to pay for any commission, which may be paid to a financial adviser.

Annual management charge: This charge is imposed by a fund management group to cover the ongoing management, and associated duties, of a fund. Some of this charge is often paid to an independent financial adviser (IFA) as an annual commission/fee. Another slice of this charge is often paid to the fund supermarket for allowing the fund to be ‘on their shelves’.

Both types of charge may vary in level depending on the type of fund.

Fund supermarkets normally discount the initial fund charge but the level of discount may vary across different propositions. The annual management charge may also be discounted but again the terms available may vary across different fund supermarkets.

Questions you need to ask:

• Is the fund supermarket available to investors direct?
• Are any funds or fund management groups you have a particular interest in available on the trading platform?
• Do you have other investment products that you would also like to see quoted on the same platform and will the fund supermarket facilitate this?
• Does the fund supermarket charge to transfer existing investments on to the platform?
• In case you become dissatisfied with the supermarket service provided, ask if it is possible to transfer investments to another fund supermarket, or back in to your own name.
• Are you comfortable in making your own fund selections (called execution only)? Is advice available if necessary?
• Do you understand the investment tools that may be available to help your decision-making?
• There are more sophisticated versions of fund supermarkets available which facilitate other investment products such as investment bonds and pensions. Would this be more suitable for the investor? If so, these are usually only available through an independent financial adviser, and sometimes called ‘wrap’.
• Is this the cheapest way for you? Try discount brokers or independent financial advisers who sometimes will have arranged bigger discounts than the supermarkets offer.