Some of the terminology in the unit trust and linked product industries is bandied about so frequently that it is assumed everyone understands it. That's very off-putting for new investors.
In response to a reader's request for an explanation of some of the terms, here's a de-mystification:
This is the investment expert who buys and sells shares on your behalf. Fund or portfolio managers can either be in charge of a retirement fund or unit trust, where all the investors are pooling their money and sharing the costs of buying and selling shares. Or they can manage an individual portfolio of shares for you if you have a certain minimum amount to invest.
Fund managers who handle unit trusts or pension money are often found at the big banks or insurance companies whereas those who manage private portfolios can be found at, for example, merchant banks or stockbroking firms.
A good broker or independent financial adviser will pick the most appropriate investment products for you from the full range offered by all the institutions and should also be able to advise you on medical products, tax and estate planning.
A tied agent/broker/consultant is a salesman who is reliant on income from a single institution and will sell you only that institution's products. Whether you use an independent broker or a tied broker you still have to pay commission on many products, though some independent advisers charge an hourly fee instead.
Corporate brokers are employed full-time by a firm specialising in retailing financial products.
Linked product companies are wholesalers. They do not sell directly to the public but only through brokers or intermediaries.
A linked product company offers a range of unit trust-linked investments. For example, you can buy a package of different unit trust funds to suit your particular circumstances with the ability to switch between them at minimal cost. Or you can buy an annuity which in turn is invested in unit trusts of your choice. Examples of these companies are TMA or UAL Investment Planning Services (IPS).
You pay fees for the services of a linked product company in addition to the applicable unit trust fees.
Unit trusts are exactly that trusts. When you buy a unit trust, your money is used to buy shares or bonds or kept in cash until the fund manager finds the right opportunity to invest it. The cash or shares are owned by a trust whose beneficiaries are the unit holders. But the trust is managed by a unit trust management company which is registered with the Financial Services Board.
Any profit made by the trust from its investments is distributed to unit trust holders, but the unit trust management company makes money from the fees it charges the trust (and in turn, you) for giving investment and administrative services and can also profit from trading in its own units.