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Top broker recommendations for your Isa

FUNDS: We asked top brokers for their fund recommendations – and then found the cheapest way to buy them
March 11, 2011

It's not enough to pick good funds for your individual savings account (Isa) – you need to make sure you are not paying over the odds for fund or Isa administration charges.

With the end of the tax year approaching, if you have not already used your individual savings account (Isa) allowance and you are planning to invest, no doubt you are looking to add some good investments to your portfolio by 6 April. To help you do this, we've asked four advisers and brokers what they suggest as cautious and aggressive fund choices.

As well as picking a good fund for your Isa, you should also try to minimise your costs. For this reason, we are not just setting out eight fund picks for your Isa, but have also researched where you can buy them most cheaply.

Many brokers and fund platforms offer the option of a stocks-and-shares Isa, with various fund and wrapper charges. There is no one answer to which one is cheapest because this depends on what you hold in the Isa and a number of other factors. The Isa with cheapest charges for one fund, for example, might not be as competitive on the other funds you want to hold.

Isa wrappers purely for investment in open-ended funds such as unit trusts or open-ended investment companies (Oeics) tend to be cheaper than those that also allow listed investments such as investment trusts, shares and exchange-traded funds (ETFs). For example, Hargreaves Lansdown Vantage Isa and Fidelity Isa do not charge for trading or switching funds, but Hargreaves Lansdown does charge for trading listed investments while Fidelity does not offer the option of holding these at all.

If you want to trade and switch funds frequently you need to consider whether it is more cost effective to opt for an Isa wrapper with free or cheap trades, or one that minimises fund charges. The best option for minimising fund charges in a portfolio that holds listed investments together with unit trusts is probably Alliance Trust Savings' Isa, which charges £12.50 a trade for all investments after your first two free deals.

Alliance Trust Savings and some other providers waive the initial fund fee (which is often as much as 5 per cent of your investment) and offers rebates on the annual management charges (AMC), which sometimes run to 1.5 per cent of your investment. The rebate means that you get paid a percentage of the AMC back in cash.

Other things to look for are set-up fees, transfer in/out fees and annual administration charges.

If you have an idea of what you want to invest in, how large your holdings will be and how frequently you are likely to trade them over the year, you could try to build up a rough estimate of how much the different Isas will cost for you.

Also remember that rates and charges continually change, so keep an eye out for any good deals or changes.

Some brokers offer deals on specific funds. For example, for fund purchases via the Share Centre, Isa investors pay the annual management charge and the initial fee unless the fund is on the Share Centre's list of 120 Platinum funds, for which the initial charge is waived.