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‘Clean’ HSBC index funds are pretty messy

The passive investors who frequent Monevator love cheap funds like teenage boys love cheap dates. So it was with a certain frisson that I greeted the news that HSBC have fired their incredible shrinking ray at their index fund Total Expense Ratios (TER).

The TERs or Ongoing Charge Figures (OCF) have shrivelled as follows:

FTSE 100 Index 0.27% 0.17%
FTSE 250 Index 0.29% 0.19%
FTSE All Share Index 0.28% 0.18%
American Index 0.30% 0.20%
European Index 0.35% 0.25%
Japan Index 0.33% 0.23%
Pacific Index 0.46% 0.36%
UK Gilt Index 0.28% 0.18%

That’s Vanguard beating form.

So if you’ve already got a portfolio full of HSBC index funds (as many Monevator readers do), you’ll be reaping the reward of the lower cost shortly, right guys?

C no evil

Yeah, no. The weeny OCFs only come with a new spin-off version of the fund – the so-called C class.

The C class funds are clones of the familiar retail share class index funds used in the Slow & Steady portfolio.

The holdings are the same and the roles played in a portfolio are the same. The only differences are the 0.1% snipped off the price tag, limited availability and the backflips you need to do to calculate whether these funds are actually a good deal. We’ll come back to that in a minute.

You can spot a C class fund in your broker’s listings by the telltale C it will have in its name. For example:

HSBC FTSE All Share Index C

The ISIN numbers are different from the retail versions of the HSBC index funds so, if you want to convert to C class, you’ll need to order your broker to make the switch.

Get fresh smelling C Class index funds for average performance

C no funds

But your broker may not stock the C class funds.

The back story is that these funds are not primarily intended for retail investors. They’re designed for the likes of Independent Financial Advisors (IFAs) who need to be squeaky clean about charges once the RDR regime kicks in on January 1.

Listings by execution-only brokers seem pretty haphazard, so far I’ve found the C Class on:

  • Clubfinance
  • Interactive Investor
  • Commshare
  • Cavendish Online

The common link is Cofunds. Cofunds is a generic fund investment platform that is rebadged by brokers wishing to offer their own service. It’s a bit like discovering that all the cosy country pubs in your area are run by the same mega-brewery.

Not every Cofunds-backed broker is stocking the C class yet and HSBC are supplying other platforms too. My best advice is to call your favourite broker to see what they can do.

Sadly, the choker is that you’re unlikely to get the C class funds without having to pay extra platform charges. And these charges will wipe out the cost advantage for most investors.

C no difference

HSBC slashed the cost of the C Class by stripping out the 0.1% platform fee that is bundled up in the OCF paid for the retail versions.

Vanguard refused to pay this fee from the beginning which is the main reason why their funds weren’t sold on many platforms. It’s also why you’ll always pay a dealing fee or a platform fee (or both) to own Vanguard funds on top of the OCF.

So let’s face it, no platform that wants to stay in business is going to offer us HSBC C class index funds for free.

Platforms are going to levy an additional fee to put the C class on their shelves. The difference is that you’ll know what you’re paying, to whom and why, and that’s the whole point of RDR.

Sadly, the out-of-the-closet platform fees are considerably more painful than the hidden ones of old that nobody talked about.

Returning to our C class listing brokers:

Clubfinance – said the funds were listed by mistake. When they are made available then they will cop the following extra charges:

  • £40 annual fee
  • 0.29% on the first £100,000
  • 0.26% on the next £150,000
  • And so on, up the tiers until you’re paying a mere 0.15% after the first million
  • This is known as the Cofunds Explicit Charging Structure
  • 0.1% Clubfinance platform fee

Interactive Investor – we know all about thanks to their price rise car crash earlier in the year:

  • £80 p.a. platform fee
  • £10 dealing fee on funds
  • Some free trades available and regular purchases are £1.50

Commshare – the staffie I spoke to didn’t know anything about additional charges, but I’ve since found this on their website:

We can arrange investments in No-Trail Funds in return for a fee (typically 0.25% p.a. of the value of your No-Trail funds) charged to your CommShare Cash Account.

Cavendish Online – again, the support staff got a ‘computer said “no”’ on platform charges but the website makes it clear that investors will be hit by Cofund’s explicit charging.

Best case scenario

Most small investors are clearly better off sticking with the regular retail HSBC index funds and a no-fee broker.

The C Class funds only work if you can reduce the explicit platform fees to less than 0.1% of your assets.

So if you’ve got over £90,000 in HSBC index funds and can restrict your trading fees to £10 per year then the C Class will just edge it at Interactive Investor.

Where the C Class index funds butt up against Vanguard there’s now very little difference in OCF. The game essentially comes down to who can offer the cheapest platform fees.

There is another one

HSBC themselves offer the only faint hope of a clear cut winner, if they decide to sell the C class funds directly to investors sans platform fee.

Monevator reader and MSE forum Sensei, Snowman, has been tipped off that this could happen from mid November.

I tried to confirm this with HSBC but was told only that the C Class would be made available through their Global Investment Centre by January 1 and that charges are still being worked out.

So who knows? Not the HSBC frontline staff, anyway.

Take it steady,

The Accumulator

{ 47 comments… add one }
  • 1 saveonarola October 9, 2012, 12:16 pm

    Thanks, Accumulator. Great info.

  • 2 Jessica October 9, 2012, 1:12 pm

    Thanks for the great article! I was wavering between Vanguard and HSBC but now am thinking that the Vanguard ETFs still seem to be the clear winner for creating my own passive portfolio, so I’m planning to bite the bullet and pay dealing costs to buy them.
    But I’m noticing a very clear correlation though in the performances of the Vanguard World and Emerging Market ETFs, I’m just wondering if there’s any point buying them both, or will just the World ETF do? Many thanks!

  • 3 Neverland October 9, 2012, 4:46 pm


    Have a look at the index constituents on the two funds on Vanguard UK website

    I think from memory you will find the the “World” index that Vanguard track is in fact only really Europe, North America, Japan and Australia

    What you end up with is a fund which is 50% invested in the USA with big holdings in Apple, Microsoft, IBM, Exon, GE, Walmart etc

    If you want to actually directly invest in companies like Samsung, CNOOC in China, Bank Itau in Brazil, Gazprom or whatever you need to buy the Vanguard emerging market fund

    However, most of the time emerging market fund just mimics the S&P 500 performance in an exaggerated fashion, so its not really worth it unless you think you are going to get to a five figure holding in the emerging market fund in a reasonable period of time

  • 4 Alex October 9, 2012, 5:00 pm

    Vanguard UK ETFs:

    1. Their dirt-cheap FTSE All-World ETF (VWRL) is, as the name suggests, all-world. In other words, it DOES include emerging markets. It’s incredible really: one share captures everything.

    2. These funds were only launched a few months ago – so it’s probably not useful to compare their to-date performances.

  • 5 Nick October 9, 2012, 10:10 pm

    A quick note on the RDR regime you mention above. RDR definitely won’t force EO brokers to change their pricing model, as it only applies to IFAs. However, there are rumours (not yet confirmed) that the FSA may be extending RDR to apply to execution-only brokers. If that’s the case, then Cavendish (and others, including ourselves) will have no choice but to change how they charge – that’ll help transparency as the charges become explicit (good), but may increase the cost of investing, especially in tracker funds (bad.) This is because the platform fees currently vary from fund to fund – and for trackers, the platform fee is usually 0.1%, whereas Fidelity and Cofunds will charge 0.25% and 0.29% per annum respectively across the board (irrespective of the fund) in the new ‘unbundled’/’explicit’ charging models.

    Hopefully things will become clearer regarding pricing as RDR comes into force – but the net effect in the short term is that understanding all of this has become a lot more complicated!

  • 6 Jessica October 9, 2012, 11:04 pm

    @Alex and @Neverland

    Thanks for your comments on Vanguard ETFs. It would seem to make more sense to buy both Emerging markets and All world ETFs in that case!

  • 7 ivanopinion October 10, 2012, 9:00 am

    Great research. I can’t actually find the C class units on Interactive Investor at present. They are not listed if you enter HSBC in the search box when you are logged in to your account. However, previous experience tells me that this is not always a reliable guide to what is available.

    Of course, if you already have an account with Interactive Investor, the only incremental cost for buying HSBC C is the dealing charges (and you do get £20 worth of credit against dealing charges each quarter, so if you would not otherwise use this credit, there isn’t even any incremental cost for dealing charges). It is hard to see how this is sustainable. Either Cofunds is supplying these investments for free (because we know it is not getting any commission of any kind from HSBC) or Interactive Investor is paying a fee to Cofunds, funded out of the quarterly account fees and dealing charges. Perhaps it is the former, and Cofunds is relying on investors having other funds as well as HSBC C, so it gets to keep platform commission on those of the funds?

    It will be interesting to see if Alliance Trust Savings bring in these new C class funds. They already provide Vanguard funds, which pay no trail or platform commission, so the new HSBC fund classes should be no different from ATS’s perspective.

  • 8 ivanopinion October 11, 2012, 9:13 am

    I can’t see HSBC C on Cavendish either. I assume you are talking about legacy Cofunds accounts with Cavendish, because I don’t think it is currently possible to open a new Cofunds account there. Are you simply assuming that because the Cavendish website seems to say that these legacy Cofunds accounts will be switched to the new Cofunds charging structure, it will then be possible to invest in the commission-free funds carried by Cofunds? (I note that the Cavendish webpage that you link does not explicitly mention legacy Cavendish Cofunds accounts. However, presumably that’s what they are talking about, otherwise there would be no particular reason to single out Cofunds for discussion on that page.)

  • 9 The Accumulator October 14, 2012, 12:53 pm

    Hi Ivan – iii’s erratic search box didn’t turn up the C Class, but a good ol’ Google search did. Here’s a link to the FTSE All Share C class: http://www.iii.co.uk/investing/factsheet/G18W

    Re: Cavendish – I spoke to them on the phone and they told me the C Class are available. It’s always difficult to be sure though, as often the desk team’s seem to be groping in the dark, and I’m never 100% about these things until I’ve either bought them myself or a Monevator reader reports a successful transaction.

    The Cavendish RDR webpage seems to imply the future for them definitely isn’t Cofunds and that they’ve negotiated a discount with Fidelity. That’s possibly how iii are able to make their model work: by negotiating ‘favoured status’ with Cofunds.

  • 10 Snowman October 17, 2012, 2:28 pm

    Very honoured to get a mention on your excellent blog.

    Latest development is I have received a letter today (dated 16th October) from HSBC saying that the management of the Global Investment Centre (GIC) will switch to HSBC Bank from HSBC Trust Company on 16th November (something they have been planning to do some time in 2012 since the beginning of the year).

    The letter also says that they will at the same time be ‘adding a far wider range of funds for you to invest in’. This is consistent with them previously telling me on the phone the HSBC tracker C class would be added on 15th or 16th November. But there is no specific mention of the C class being added or any other clues in the letter.

    They will also be removing a major obstacle in investing with the GIC by accepting transfers in of investment ISAs (something they didn’t previously allow).

    There are no clues in the letter as to whether there will be a separate charge for holding the class C HSBC trackers, but perhaps looking at it optimistically no news is good news.

    So I am still hopeful although as they say ‘hope’s not enough son ask your parents’.

  • 11 The Accumulator October 17, 2012, 9:16 pm

    Snowman, thanks very much for the update. I don’t hold any investments with HSBC GIC so very useful to get the skinny. It will be very interesting if the C Class are available through HSBC without platform charges.

  • 12 Snowman November 14, 2012, 2:12 pm

    The excitement was just building nicely and then HSBC do this to us – the following notice appeared when I logged in today to the GIC:

    Important notice

    We informed you recently about improvements to the Global Investment Centre including changes to your Terms and Conditions from 16 November 2012.

    These changes have been delayed and will now be in place for 3 December. Your new Terms and Conditions will come into effect from Friday 30 November and the updated service will be available to you on Monday 3 December. Until then the current Terms will apply.

  • 13 Snowman December 3, 2012, 10:57 am

    My parents were right. Hope’s not enough. Sorry if I transmitted some false excitement out there.

    The HSBC Global Investment Centre updates have been made and there is no sign of the HSBC C class trackers.

    Worse still I am now being told by the GIC on the phone today that when they are made available through the GIC in January 2013 there will be a whopping 0.29% pa platform charge to hold the clean class making them 0.19%pa more expensive (0.29% platform charge – 0.1% lower OCF) than holding the dirty (0.25% amc) class currently.

    Better news is that ATS are proactively moving investors to clean share classes from January (according to koru in a post on moneysavingexpert). I wonder if that means the HSBC C class trackers will be made available from ATS from January? If using ATS consideration has to be given to using Vanguard trackers rather than HSBC trackers. The current platform fee at ATS is £48pa although the fund dealing costs for buying and selling funds amongst other charges can make it seem cheaper than it really is.

  • 14 ivanopinion December 3, 2012, 12:57 pm

    Not all of the C class trackers are on Interactive Investor. I checked Pacific, European and American and none seem to be available (unlike UK All Share).

    Vanguard is available from ATS and Interactive Investor. Which is cheapest will depend on how many accounts you need and how often you trade. Interactive Investor is £80 per year, but this covers all accounts for your whole family. If husband and wife each have an ISA account and an investment account, this would cost £192 per year at ATS, but £80 per year at Interactive Investor. If you add in accounts for parents or adult children, the cost difference could be even higher.

    Trading is cheaper at Interactive Investor, at £10 per transaction, versus £12.50 at ATS. Dividend reinvestment is 1% with Interactive Investor, capped at £10. With Interactive Investor you get £20 worth of free dealing per quarter.

  • 15 The Accumulator December 3, 2012, 10:05 pm

    @ Snowman – thanks for keeping us up to date. It was always something of a long shot, I guess. The C class win some and lose some vs Vanguard in a straight TER match-up. Would be interesting to compare tracking error over the last few years to see if there’s more to the story.

    @ ivan – good point about the iii family bonus. I’d personally make all my purchases as regular investment trades at £1.50 a pop on ATS and I think also at iii. TD Direct currently smashes them both out of the park though and the word is that they have some Vanguard funds – including the superb LifeStrategy all-in-one solution.

  • 16 Snowman December 4, 2012, 1:12 pm

    Interesting you mention tracking error.

    I’ve been looking at tracking error between the Vanguard and HSBC all share 0.25% amc tracker (obviously you can then subtract 0.1% to get a comparison with the C class should you want to do that) for a while based on end of month prices vs the FTSE all share total return index.

    Because the Vanguard fund has only been running since 2009 there is not a long period to look at.

    The HSBC all share tracker is priced at midday (which is normal for FTSE all share trackers) whereas the Vanguard all share tracker is priced at 4:30pm.

    That makes the Vanguard tracker appear to track much more smoothly (because the comparison is usually made with the end of day FTSE all share total return index price). The tracking error for the Vanguard tracker is incredibly consistent month on month at 0.1% (to 1 DP) which compares with a 0.15% TER.

    The underlying tracking error for the HSBC all share tracker is harder to gauge because the price timing difference with the end of day index makes it fluctuate from month to month but my best guess is it isn’t too far off the TER with the tracking error around 0.3% taking out the fluctuations (maybe a further 0.1% systematic lag will become apparent over time but I can’t see it at the moment)

    The different stamp duty treatment affects the comparison. The HSBC fund has the price consistently sprung up to a buying basis from my analysis (because the fund is growing) so there is no obvious additional tracking error there as far as I can see (there might be a tracking error with other more mature funds which swing to a selling basis at times such as the L and G UK index tracker where a comparison over periods where the price is swung differently take place).

    However the real stamp duty effect is the 0.5% stamp duty reserve tax levy under Vanguard which gets paid into the fund and inflates the performance of the Vanguard tracker as opposed to the HSBC single pricing method where stamp duty is an overall lag on performance of the unit price, net of stamp duty that can be recouped through the swinging unit price (not all of it can be recouped through the swinging price because of the way stamp duty and SDRT operates). Incidentally I have discovered a way an investor could profit from the swinging unit prices of some trackers, I have not been using it I must emphasise, but who knows if others could use it in the future which could cause some dilution.

    In fact the stamp duty levy for long term holders of the Vanguard all share tracker is critical when comparing with the HSBC C class all share tracker and I would suggest possibly the major effect.

    The longer you are going to invest the better off you are with the Vanguard SDRT levy than with HSBC as incoming investors pay their own stamp duty and very long term the lack of a dilution effect is important with Vanguard. Short term investors (which I’m not) may be better off with HSBC but that assumes that they sell out while the fund is still growing and the price swung up.

    I’ve only done a tracking error comparison with the FTSE all share so I don’t know how the tracking of other indices and markets will compare between HSBC and Vanguard.

  • 17 Bowlhead99 December 5, 2012, 10:48 am

    The C class is now available on TD Direct Investing. As a ‘bit of a test’ I bought some of the FTSE 250 tracker yesterday and was just charged the published HSBC price for that day of 143.0 with no additional dealing fee. TD have a quarterly inactivity fee which you avoid if you have trades in the quarter or have a portfolio valuation over 7.5k at the end of the quarter. For ISAs, they just have a flat annual fee which again you can avoid if you’re over a minimum valuation of 5.1k.

    They also recently added a number of Vanguard funds that they didn’t previously have, e.g. the Lifestrategy ones. They don’t carry all the ones you might want (I couldn’t find a Global Small Cap or Emerging) but having Lifestrategy is great.

    I had previously just used TD for shares / ITs and presumed I’d need to keep using other places for a good range of funds. But perhaps not now? Though I don’t know how zero commission dealing and zero annual fee on a Vanguard or HSBC C fund is going to be sustainable for them, unless they effectively subsidise them with whatever they make on share dealing fees and ‘low value/inactivity’ fees from everyone else. Perhaps this would change after the platform review in a year or so?

  • 18 The Accumulator December 5, 2012, 10:14 pm

    @ Snowman – much obliged to you for your knowledgeable tracking error analysis. As a passive investor, I’m in it for the long-term so I’d plump for the Vanguard fund in a straight match-up.

    @ Bowlhead – thanks for the heads up. No need for the GIC now, Snowman? It really is game, set and match to TD Direct now for passive investors. C class HSBC index funds and Vanguard – free of dealing fees, platform fees and any other fees, if you stay over the minimum portfolio valuation. I’ve put in a purchase for the Vanguard funds. Minimum purchase £500 for your first trade, then it’s £50 to top-up. Using the regular investment scheme the minimum amount is £50 – even for your first trade.

    Ivanopinion has ventured elsewhere that this is surely an unsustainable model for TD. Is this a case of too good to be true? It certainly wouldn’t hurt to give the situation another 12-months and await the RDR 2 verdict on platforms due for implementation Jan 2014. Otherwise, if you’re already with TD or don’t mind switching then enjoy it while it lasts.

  • 19 Snowman December 5, 2012, 11:33 pm

    Yes I was looking in completely the wrong direction at the GIC.

    I’ve already opened a TD Direct Investing account and invested in the HSBC all share index C class today, thanks to that brilliant spot by Bowlhead, who I definitely owe a beer to! So I can also confirm it’s possible.

    And I’ve already printed off the transfer form to move my ISA with the GIC (and another ISA) over to TD Direct with the view of moving my ISAs into the Vanguard funds (and putting my non-ISAs with HSBC C classes because I may need to sell from time to time to use up CGT annual allowances).

    Of course it is unsustainable for TD to offer this but the future has to be in clean classes for those with good size funds via a broker offering a fixed charge rather than a percentage holding charge.

    When TD introduces charges then it should then be possible to re-register away from January 2014 to another broker (although it may be a small enough charge to stay put). I’m counting on this being possible with minimal cost and with the new broker being cost efficient (for example holding charge + clean fund charges still less than the dirty class charges) to make it worthwhile.

    For those starting out with smaller funds (say 10k) getting into Vanguard funds via TD Direct could be problematic because when they do impose a holding charge you will need to move the funds elsewhere and the holding charge may make it relatively expensive to hold them anywhere. And if you sell up you lose your 0.5% stamp duty levy. Not saying it shouldn’t still be done but it’s more of a problem.

  • 20 Snowman December 8, 2012, 10:24 am

    It is worth doing a search for Retail Distribution Review on the FAQ for TD Direct Investing (can be accessed from their home page via menu at top right).

    They introduced a 0.35% platform fee from 1st July 2012 for funds paying them trail over 0.5% pa and began to rebate the trail so presumably a good thing for investors affected. Incidentally they rebate trail commission for funds that pay them trail below 0.5%. So at the moment they are making money from the above 0.5% trail active funds which is subsidising the lower TER/OCF funds such as trackers that pay no or little trail.

    TD say on RDR

    ‘TD welcomes the changes to the fund industry as a result of RDR. For this reason we have chosen to act now [now is referring to July 2012] before the regulation comes into effect as this is the right thing to do for our clients.

    The Trail Commission rebate and Platform Fee we have introduced are an interim measure designed to ensure our clients benefit from a simple and transparent approach to Trail Commission ahead of the regulations coming into effect on 31st December 2012.

    TD will continue to monitor changes across the funds industry as a result of RDR, and commit to keeping you informed of any further developments. For example further rebates in the form of cash payments may be stopped by the FSA at some time in the future; you should not rely on cash rebates being continued.’

    So no real clues there.

  • 21 Trevor Dewhurst December 8, 2012, 6:03 pm

    So? Let me summarize… TD Direct is the place for me to got if I want some the usual HSBC index funds (normal or C-Class): FTSE, Europe exUK, American, Japan, Pacific, Emerging, Gilts and some nice little Vanguard Lifestrategies?
    no dealing fees, no management/ platform fees if I drop in 5.1K?
    Any other catch or things I need to consider before I sign up with TD Direct Sunday or Monday?

  • 22 The Accumulator December 8, 2012, 8:42 pm

    @ Trevor – correct. They even have a few more Vanguard funds – the UK domiciled range. And no catches. Unless you count the fee you’ll pay if you want to switch to another broker later on. But this is an industry standard and TD’s charges are not unusual. Bear in mind, it’s all subject to change at the drop of a hat. Earlier in the year Interactive Investor was the no.1 pick, not any more.

  • 23 Allan December 9, 2012, 3:53 pm

    Hi all, I’ve just discovered that the C-Class funds are available with TD Direct & vaguely remembered that I read this article- I’m glad I managed to find it again- some really helpful information guys- thankyou.

    I’m still quite new to investing so I thought I’d ask for some advice- I’m about to switch my holdings to the corresponding C-Class versions, if I sell my ‘Ret’ holding & buy ‘C-Class’, is there a chance of being out of the market for a siginificant amount of time? Sorry if this is a bit of a daft question….

  • 24 Trevor Dewhurst December 10, 2012, 3:56 pm

    Hi Accu,
    seems like both ISAs are free.
    1. Regular investing: “No annual account administration fee ”
    2. Trading ISA: “No yearly account administration fee for accounts valued at £5,100 or over”

    Any practical difference between both alternatives? I tried calling the TD Direct number this morning and this afternoon (waiting 20minutes then 15 minutes before giving up).

  • 25 Geo December 11, 2012, 10:23 am

    Interesting funds people. I tested the HSBC C funds, and currently it seems on TD you can now only invest in these, the retail ones didn’t come up in the regular invest list. And finally its accepting vanguard in the regular invest setup too. Happy days …. for now.

  • 26 The Accumulator December 11, 2012, 2:59 pm

    @ Trevor – No, it’s one and the same thing.

    @ Geo – Thanks for the update. Good to know that someone has got a result. I’m still waiting for my Vanguard purchase to go through.

  • 27 Geo December 11, 2012, 3:04 pm

    AH well its only accepted for me to add vanguard in the regular list (it error-ed before), i wont find out until January if its goes through. Again lots of conflicting info from TD on vanguard it seems…. maybe best to wait for the dust to settle before we count our lifestyle chickens. TD really should try and be more transparent about the options though and put out some news PR to their investors.

  • 28 Trevor Dewhurst December 13, 2012, 11:51 am

    I`m new to investing and I`m very much fascinated with the idea of index funds/ passive investing. My dad tells me with index trackers I have a 1 in 9 chance of beating most expensive fund managers (which… if I think of it, is not really the best recommendation for them).
    But there one thing I can get my head around? Should I be selling if the market tanks? Lets say I have spent 5 years to accumulate 15K on the FTSE index starting from 10K. And within 3 months I lose 2Grand because the market is going crazy. Shouldnt I protect my assets and sell (or at least significantly reduce) my position to at least save the 3K and then buy back the stuff when the market has reached the lowest point?
    Or should I (as it comes with index trackers) just sit, do nothing and watch how my 10K gets reduced to 9K????

  • 29 The Investor December 13, 2012, 3:24 pm

    @Trevor — If anyone *knows* the market is going to fall 30%, then mostly they should of course sell and re-buy when it’s lower. I say mostly because there may be tax complications for some etc.

    However it’s entirely theoretical, because nobody *knows* the market is going to fall 30% or any other number. There are times when it looks a bit expensive and it keeps going up. There are times it looks cheap and it halves. There are times it falls 10% and everyone bunkers down for a crash, and then in rallies 25%. And as a generalisation, the biggest falls come when everything looks rosy.

    Watch the headlines for a year or two and you’ll discover the hit rate of predictions is extremely poor. Some (by which I mean a handful) of people may be blessed with some ability to time rises and falls in the markets, but academic research suggest the vast majority will just fritter away their gains like this in fees and foregone gains.

  • 30 Geo December 13, 2012, 3:54 pm

    @The Invester – Here here!

    @Trevor – you are in a lucky position to learn some thinsg before you invest unlike some of us who maybe learnt the hard way or had the wool pulled over our eyes by RDR frightened IFA’s.

    Firstly don’t rush into it, but don’t take more than 6 months, but watch the market and investments and see how things move,

    then ready Tim hale carefully.

    Then read monevator.

    Then takes you chances.

    I’m sorry to say but your Dada is wrong in the long run. the facts are there. Even Money Observers 30th Anniversary supplement showed that over the period they were publishing showed only 10 funds beat the market. You might be luckier in the short run, but its all luck!

    You have a great opportunity to learn and read before you invest. Don’t get itchy feet,… although why not invest £50 a month in the FTSE and see where the market takes you before you plunge.

    Good luck.

  • 31 The Accumulator December 13, 2012, 7:09 pm

    @ Trevor – the evidence indicates you will beat most fund managers. Your chances of doing that increase the longer you invest. You won’t know in advance which ones you won’t beat.

    @ all – This just in from TD Investing on charges (I’ve edited the full spiel so you get it fat free):

    Updates to our Rates and Charges that will come into effect from 1st February 2013.

    Our Trading Account Management Fee remains £12.50 plus VAT per quarter. The fee will not be charged if you:

    Have a funds (Unit Trusts/OEICs) valuation of £10,000 or more in your portfolio or

    Have a SIPP or ISA linked to your Trading Account.

    We will continue to waive this fee if you trade once or more per quarter. We will also continue to waive the fee based on your individual portfolio valuation but the minimum required is increasing from £7,500 to £15,000.

    No changes to our ISA and SIPP fees

    Our ISA Administration Fee remains unchanged and continues to be waived if you:

    Have a balance in your ISA of £5,100 or more or

    Have a regular investing facility set up on the ISA.

    Our TD SIPP Administration Fee remains unchanged at 0.25% of the value of the SIPP every 6 months (subject to a maximum of £100).

    Online funds trades (Unit Trusts/OEICs) remain free of trading commission however funds trades by telephone will now be charged at £40 per trade.

    New funds with no trail commission

    Our fund pricing has not changed and we are pleased to introduce a new class of funds with no trail commission included in the Annual Management Charge.

  • 32 Trevor Dewhurst December 14, 2012, 12:10 am

    hi Geo
    hi Accu, sorry I mistyped.
    I meant 9 in 10 chance to beat fund managers. like this the sentence and the context of index fund investing and low fees make more sense.
    Thanks for the TD supplement. I will be on holidays till the these next 3 weeks till 7th of January. I will be doing some extensive research before I place my first 3x£1000 and a monthly £200 commitment. I just dont want to lose my 10K within the first few months :-))

  • 33 Trevor Dewhurst December 21, 2012, 1:31 pm

    Hi guys,
    last question before Christmas…
    I recently (last Sunday) placed 5 orders with TD
    [Royal London UK All Share Tracker A
    HSBC FTSE 250 Index C
    Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund
    Vanguard US Equity Index Acc
    HSBC Pacific Index C
    HSBC UK Gilt Index]
    but ALL orders are still in the “Order list – pending” waiting for a settlement…
    How long does it normally take? Surely not that long I always thought…

  • 34 ivanopinion January 5, 2013, 3:14 pm
  • 35 The Accumulator January 6, 2013, 2:46 pm

    Great stuff, thanks Ivan. The BlackRock trackers have been slashed – especially the property and emerging market ones. The AT list quotes AMCs though not TER/OCF so I expect they’ll be a bit more expensive yet. Haven’t got time to check now though, gotta go out, Mrs Accumulator wants fresh air, will come back to it.

  • 36 ivanopinion January 13, 2013, 8:12 pm

    TD Direct has now announced that the current lack of fees on clean priced funds is just a 6 month teaser to lure in punters (or, as they put it, they are “proactively making clean funds available to you now and until August 2013, you can try these funds for free, without paying a platform fee”).


    From September, you pay 0.35%, which makes them more expensive than ATS or Interactive Investor, unless you have a pretty small portfolio. (That’s unless ATS or II have more changes on the way…)

  • 37 ivanopinion January 13, 2013, 8:15 pm
  • 38 The Accumulator January 13, 2013, 10:51 pm

    Great work, Ivan. That ends the mystery of how TD Direct can do it. They can’t.

    Breakevens on 0.35% platform fee:

    Alliance Trust @ £48 annual charge = £13,714

    iii @ £80 annual charge = £22,857

    HL @ £24 annual charge (1 fund portfolio) = £6857

    Portfolios values below these breakeven rates are better off at TD (in a regular trading ISA).

    There are dealing fees to account for at iii and Alliance Trust too. Estimate your likely annual dealing fees and add them to the annual charge / platform fee.

    Then the calculation is: Total costs / 0.0035 = £breakeven

  • 39 Snowman January 19, 2013, 11:18 am

    HSBC have written to GIC investors to say they intend to introduce a 0.39%pa platform fee in May 2013 for holding clean share classes on the GIC. This will make them 0.29%pa more expensive than the existing retail HSBC classes.

    Legacy funds such as the HSBC retail class can remain on the GIC without platform fee. But you can’t add to them or switch to them once the clean classes are added to the platform which may be any time from 28th January 2013.

  • 40 The Accumulator January 19, 2013, 11:24 am

    Thanks for keeping us up to speed, Snowman. Sadly this is the way it is going for us. I think we can expect to see this regime repeated across the board.

  • 41 Nick January 19, 2013, 11:47 am

    Yes – RDR seems to be making investing more expensive, particularly for trackers. That’s a pretty unfortunate side-effect.

    Providers will have to levy an explicit fee going forward as a result of RDR, rather than receive a portion of the TER as they did until December. This is good because it makes it clearer where the fees are going; however, most providers seem to be levying a flat % or £ fee regardless of what’s being invested in, which has a disproportionate effect on tracker funds, because the platform fee for trackers in the old model (which was included in the TER) was lower than the flat fee being levied now across the board.

  • 42 Tony January 20, 2013, 3:36 pm

    In the HSBC GIC information they sent out they mention that most of the products will be cheaper but I expect this is not the case for the HSBC trackers which up till now seemed to be good value. I fail to see how they can justify almost doubling the cost of the HSBC tracker products…

    I hope The Accumulator will have time to do a roundup of the best ISA stocks and shares providers for the 2013/14 year!

  • 43 Snowman March 20, 2013, 5:11 pm

    Does the abolition of Stamp Duty Reserve Tax in the budget from April 2014 mean that the HSBC retail all share tracker (post 2014) will now have the performance of the HSBC C class tracker (pre 2014)?

    From looking at some slightly old account figures SDRT (note NOT stamp duty which I think is shown separately as tax on purchases) is in the region of 0.1%pa for the HSBC all share tracker for 2010 and 2011.

    So not having that 0.1%pa post 2014 compensates for the extra 0.1% in the TER for the retail class trackers?

    Does anyone (who is better at analysing accounts than me) have a figure for the tracking error due to SDRT ?

    It has always confused me that the L&G and M&G all share trackers only seem to pay the equivalent of 0.03%pa SDRT compared with the nearer 0.1%pa figures for HSBC and Fidelity Moneybuilder UK index.


  • 44 ivanopinion March 20, 2013, 5:26 pm

    That would seem to make sense. However, the C class are still going to perform better (ignoring any differences in platform costs).

    I assume this means that Vanguard will drop their dilution levy on funds that hold UK shares? I’m hoping Troy will also drop their dilution levy.

  • 45 Snowman March 20, 2013, 6:01 pm


    I think the Vanguard SDRT levy is a mis-noma; it seems to me to be a stamp duty on net purchases of investments from new money + SDRT levy. Only SDRT is being abolished. So stamp duty still needs to be recouped somehow either by floating the unit price (to allow for the differing ratio of purchases to redemptions at a point in time) or by retaining a stamp duty levy.

    I can’t see them floating the unit price, so I don’t think they will abolish the SDRT levy, they might keep it the same or they might reduce it very slightly.

  • 46 Snowman March 20, 2013, 6:36 pm

    I may have got my terminology wrong here.

    Just to clarify it is schedule 19 SDRT that is being abolished. That is the additional SDRT that is paid when units are surrendered.

    It may be that the stamp duty when there is net money to invest (through money coming in exceeding redemptions) and investments are bought by the fund manager from net proceeds is also called SDRT. But that SDRT isn’t being abolished just the schedule 19 SDRT.

    So the Vangaurd SDRT levy may not actually a misnoma, although the logic for the SDRT levy not disappearing still applies.

  • 47 Jordan Russell December 8, 2019, 7:17 pm

    Hello, I realise this is a very old story, but I’ve just come across it.

    I have investments in the HSBC FTSE All-World Index Fund Accumulation C via Cavendish, but the link to the Cavendish page on the article above no longer works. Is this still an issue?

    I guess I should email Cavendish to find out!

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