Buying an ISA isn't difficult. In fact, it's almost impossible to miss the blizzard of advertisements in the newspapers and on the web from ISA providers and intermediaries who want to sell you their products.
You basically have five choices:
You can use the services of an independent financial adviser who will help you select the funds that match your investment objectives and risk profile. The IFA will be paid commission by the fund manager whose funds you decide to buy.
You can buy direct from banks and building societies, fund management groups, and life assurance companies, all of whom advertise their ISA products in the press and on the internet. You might think that buying direct would be the cheapest way of taking out an ISA - after all, you are cutting out the middle man - but it isn't always the case. Many providers sell predominantly through IFAs and build the cost of sales commission into the product pricing. Even if they will deal with you directly, they don't eliminate this additional cost.
You can take out an ISA from a 'fund supermarket' and import the funds which appeal to you from the range offered by the supermarket.
Discount brokers don't offer any advice - they simply describe a range of funds and leave the selection up to you. The attraction is that they will pay you back some of the commission they receive from the fund manager for bringing in the business, either by actually paying you cash or by using the saving to buy you more units in the fund than you would otherwise get.
Self-Select ISA wrappers can be bought from stockbrokers. Given that the whole point of self-select is that you make the decisions, execution-only brokers are the obvious choice. Charges can either be an annual fee, or based on a % of the value of the assets in the ISA. On top of that, you'll pay dealing charges when you execute trades.
On the next pages, the costs of taking out an ISA are considered in the context of CAT standards. It's worth remembering that while front end costs are an important factor in choosing the type of ISA you get, they are not the most important.
Much more important is the choice of the shares and funds you put in your ISA, and the performance of the fund managers who invest the money. A top-performing fund with higher than average charges is likely to bring you much better overall returns than a poor-performing fund with lower than average charges.
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