Big savings from bartering: Investment trust managers operate discretionary discounting

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The Independent Online
INVESTORS rushing to transfer lump sum investments from building society accounts into unit trusts and personal equity plans should not forget to ask for a discount on charges. Bartering can result in savings of hundreds of pounds, but not all investment companies advertise their price cuts, writes Maria Scott.

Keith Crowley, a director of Invesco MIM Unit Trust Managers, said his company did not have an official policy on discounts. 'It is very much a discretionary thing,' he said.

But Invesco would consider discounts of perhaps 1 per cent on sums as low as pounds 5,000. Investors normally had to ask.

'It is the same as in life, if you don't ask, you don't get,' Mr Crowley said.

Most Invesco trusts have an initial charge of 5.25 per cent. A 1 per cent discount on a lump sum investment of pounds 5,000 would bring a saving of pounds 50.

Other companies are less open about their discounting policy. A director of one large group, who refused to be named, said his group's official policy was not to consider discounts for less than pounds 50,000. But he admitted: 'A lot of companies do discounts and a lot depends on the mood of the manager at the time.

'There is real flexibility in the marketplace. We offer discounts a lot, not on amounts like pounds 1,000 or pounds 2,000 but if they have pounds 20,000 we will consider it.

'What influences me is whether the person has done business with us before or is likely to be a long-term customer.'

Peter Emms, group marketing director at M&G, said the company had not offered many discounts in the past although it was now reviewing this policy. Normally discounts were only available on very large sums, for example pounds 1m.

Amounts like this will frequently be brought to unit companies by stockbrokers and independent financial advisers who have pooled the investments of several clients. This means intermediaries are in a good position to obtain price cuts and pass the benefits on to clients who may only have a few thousand pounds to invest.

Chelsea Financial Services, for example, normally offers discounts of at least 2 per cent on lump sum investments into unit trusts and unit trust PEPs. Investors with as little as pounds 1,000 to invest can benefit.

'People are mad to pay the full price,' said John Holden, managing director of Chelsea.

The firm has been promoting discount investments for 10 years. At present it is offering cuts of 4 per cent on a range of unit trusts including most of the funds run by the award- winning group Perpetual. Chelsea also launched a discounted PEP service recently, offering cuts of up to 5 per cent on initial charges. This virtually makes entry to many personal equity plans free.

'We usually pass the discounts on to clients by arranging for them to have extra units credited to their investments. That way they do not receive a tax bill, which they will normally face if they receive a refund cheque,' Mr Holden said.

The bulk of initial charges on unit trusts goes towards paying commission to intermediaries so a company like Chelsea will usually have to forego part of its commission on a sale when it negotiates a price cut.

But Mr Holden says his firm can operate quite comfortably on commissions of only 1 per cent.

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