When looking to buy funds there are a variety of options you can do so. Firstly, there is the indirect route which requires you to either visit a bank or an Independent Financial Adviser.
A bank will allow you to speak to a financial adviser and try to sell you the best fund available in their range, which is quite often limited. However, one must remember the saying of quality over quantity. Banks will usually present funds to you based on your attitude to low risk, ie low, medium or high risk.
An independent financial adviser (IFA) is different to the financial adviser at the bank, because they are are ‘independent’. This should allow them to recommend you a fund based on your financial position, without being tied towards any funds. Some IFA’s also work on a fees rather than commissions basis, so that you can be sure they are providing you with the best fund based on your personal circumstance.
Execution only buying of funds
Execution only sounds brutal, but it really isn’t. The execution only buying of funds allows you to buy any funds you like on an ‘execution only basis’. This means you simply tell a fund supermarket what fund you would like to buy, and they will place your order. The fund supermarket will allow you to track the performance of your fund online (usually), but are not allowed to provide you with advice.
Fund supermarkets may not be allowed to provide advice (unless it is asked for and available), but what they do usually do is produce marketing literature related to funds. This literature can be a useful guide to the overview of funds available, but one must always be cautious of marketing received no matter how respective the firm is deemed to be.
The benefits of buying your funds on an execution only basis is that you are free to choose from a wider of variety of funds, and also these fund supermarkets usually waive a big part of the ‘initial charge’ which can be as much as 5%.
A fund supermarket should be considered in similar regard to the likes of Tesco’s, Sainsbury’s or Asda. But instead of stocking food products on their shelves, fund supermarkets stock fund products.