It’s showdown time: Online brokers are finally being forced to reveal the fees they will charge in the post-RDR world.
No longer can the holdouts mask their costs with commission. Over the next couple of months everyone will have to reveal their hand, because trail commission can no longer be paid from new investments from 6th April.
In other words, you will no longer be paying for superficially ‘free’ broker’s services via an inflated Ongoing Charge Figure (OCF) routed via your fund manager.
Take a look at our broker comparison table. Every firm in the commission-funded broker and fund supermarket categories will have to come clean on its prices shortly; don’t be fooled into thinking they’re offering a good deal until they’ve revealed their post-RDR fees.
To attract new money from customers, brokers are now scrambling to offer what are known as Clean Class1 funds. And they will have to levy an explicit platform fee for their own services.
Clean Class funds are just a sweet-smelling, compliant variant of the old-style Unit Trust and OEIC funds that most brokers offer now. The difference is that the Clean Class funds have stripped out trail commission and platform fees from their OCF.
So generally Clean Class funds are cheaper than their Dirty counterparts – but then you’re stung for the broker’s fee on top.
At least you can see what you’re paying and to whom, but if you’re a passive investor like me, then your costs are expanding faster than the waistlines of the Western world.
Fund laundering
If you’re already sitting on a pile of Dirty Class funds, then one of two things is likely to happen:
Conversion – Your old funds will be converted into their equivalent Clean Class variant. This shouldn’t cost you anything and your broker should tell you if it’s happening. The unit amount and price of your new fund will likely be different to the old, but the value will be exactly the same.
You are not liable for Capital Gains Tax when your fund converts, even if you aren’t sheltered by an ISA or a SIPP.
Stasis – Your dirty fund is closed to new investment. It can still grow / plummet in value, but you can’t put new money into it and it will continue to pump trail commission into whichever financial organ is feeding from it. Any regular investment scheme will cease but you can still sell your fund.
Even so-called legacy funds must stop commission payments by 6th April 2016, so they will all have to be converted by then.
Best broker bugaloo
By the end of the next few months we should finally have a good idea of how competitive our current favourite brokers are really going to be.
We’ll track the changes on our broker comparison table and keep you in the know.
If you have a small portfolio (£30,000 or less) then look for a broker that charges a percentage of your assets and no dealing fees on funds. The current champion of the little guy is Charles Stanley Direct.
Investors with large portfolios suffer when fees aren’t capped, so look for a fixed cost broker. Interactive Investor looks very cheap now on that score, especially for families with multiple accounts.
Note that some brokers don’t charge a platform fee for Exchange Traded Funds (ETFs) in ISAs or trading accounts. This can work out well for large investors, as dealing fees make ETFs a costly business for anyone who can’t trade at least £300 a throw.2
If you want to leave your broker after a price hike then ask them to waive their exit fees. Some will do this automatically to offset bad PR and some will do it if you twist their arm. Others will just be complete gits about it.
Bear in mind that prices will never be set in amber. The cheapest broker one quarter could well be trumped the next. If you’re fuming over a price rise then check how many years it will take to earn your exit fees back if you switch, even if you pick the best option. (You might do this if you decide to switch funds, too).
Don’t get ripped off but don’t agonise over a comfortable place in mid-table either.
Take it steady,
The Accumulator
- Super Clean is an industry term that refers to discounted variants of funds. Super Clean variants are offered exclusively to powerful platform players in return for greater promotion / not being destocked, that sort of thing. Super Clean equals a bit cheaper but definitely not cleaner. [↩]
- A dealing cost of 0.5% via a £1.50 regular investment fee is the maximum I could stand to bear on a single ETF purchase. [↩]
Comments on this entry are closed.
Would be nice to see more brokers adopting fixed fees to give some options for larger portfolios. BestInvest might reasonably keep its £15 custody charge but make it a platform fee, and it would be great if HL kept its £2/month option for Vanguard LifeStrategy, which it could apply to all funds post-RDR.
I’m not optimistic though. Looks like HL will go for a percentage charge which some sources have said might be as much as 0.7%. I don’t think I’d be hanging around if that’s the case. Haven’t heard anything about BestInvest as yet.
The worst hit by all this will be those with small portfolios, due to exit fees. I don’t think brokers will be persuaded to waive them either (as happened with iii last year) as they can claim the price rises are not their fault.
Oh well, we can but hope the post-RDR landscape will be more stable, because it probably won’t be cheaper for most passive investors.
IWeb for stock only ISA’s and non sheltered accounts?
The rumours I have heard about bestinvest (and they are only rumours) are that they will have a % based fee.
I am wondering whether Vanguard fund availability may improve with the shift to clean class funds?
I am on the lookout for the best deal for a large portfolio of index tracking funds (I’d like Vanguard, but may have to settle for HSBC/Blackrock/L&G). At the moment it may be iWeb but I am holding fire for now. Not completely clear that they deal in the range of funds I will need and in income units – its not easy to find a definitive list!
‘Some will just be complete gits about it’.
Indeed. Having been hit by a quadrupling of platform charges within 8 months of moving to Youinvest for clean fund pricing, and being charged 3 years worth of annual platform charge to exit, that is very much the way it feels to me. My case is with the Financial Ombudsman Service now and I am extremely confident that the complaint will be upheld. I had a very similar complaint against Hargreaves Lansdown upheld by the FOS in 2012 when they acted unfairly.
But I am glad to be moving to ATS who have done the right thing this time round by providing a window for investors to leave penalty free.
My worry about suggesting Interactive Investor, is that they may increase fees and not allow a penalty free exit. I’ve no reason to believe they will but if they did……..
The RDR (including the platform version) has in my view been a really good thing for investors, even if it doesn’t feel like it to some. It brings so much more transparency to things. Essentially the product (the funds is the same) so finding the cheapest platform to hold them is paramount (as well as only dealing with platforms who can be trusted of course), and explicit pricing makes that price comparison a lot easier.
Is there a reason why I have to comment in order to get notification of comments?
🙂
I only have to smile and I receive notification of comments…..
As a small passive investor, with a single Vanguard LifeStategy fund tied up in an ISA with Hargreaves Lansdown I am very interested to see where this is going to go.
Now I’m worried. Not only have I recently shifted from a LifeStrategy 100% to a LifeStrategy 80% (incurring a dilution levy only weeks prior to it getting cut by Vanguard), I may now have to move it all again from HL to another platform. 🙁
+1 for being able to subscribe without commenting, for those of us who often can’t contribute anything useful, but want notifications of comments none the less.
A particular scenario where Interactive Investor looks ridiculously cheap (unsustainably cheap?) is where there is a significant funds only portfolio spread across a SIPP, dealing and ISA account (perhaps 100K in funds in each of the 3). As I understand it the total Interactive Investor platform charge is currently £144pa (+ dealing costs) as the £80pa for the dealing/ISA account is waived if there is a SIPP. No other platform comes near it (if we exclude iweb), Trustnet Direct is next best at £344pa + dealing costs and ATS is at £366pa + dealing costs. Have I got that right?
@Snowman
Care to explain why you are thinking of moving to ATS, when they sent me a letter putting up their fees considerably this month (the second time in recent memory) I was actually considering giving them the heaveho?
(I would agree with you about the current iii.co.uk pricing being unlikely to last long after they gathered enough accounts to begin harvesting)
Re: Comments and notifications, to be honest I am not sure how it works anymore! 🙂 I set it up years ago but don’t use it myself, as I read every single comment in the backend.
Will investigate!
New HL Change Details released: http://www.hl.co.uk/lowcharges
…now for the task of frantically reading them to see how us index tracking passive investors will be affected.
Yep just seen new HL fees…. cunningly they are not going to release any info on their new low fee funds until they start charging …. hmmmmm … not sure that’s very helpful.
HL: biggest change for me is that Investment Trusts are now charged separate from shares – same charges, but each category has its own cap, so effectively the cap kind-of doubles.
Or possibly I’m just misunderstanding it because its a bit early in the morning…
🙁
It looks like the £1-2 monthly fees per index tracking fund are to be removed, and replaced with an annual fee of 0.45% up to £250,000 of fund holdings (reducing to 0.25, and less if you’re lucky enough to have more).
This maybe good for those who hold a lot of different funds, but not good for people like me with 1-2 Vanguard LifeStrategy funds (whose annual fees are now due to tripple 🙁 ). Like the iii changes a few years ago, they’re announced as being cheaper for most investors but alas it appears I still don’t fit that group
I guess there’s nothing that can be done until everyone has released there charging structures…
@Jonny: Ah, yes. A 20,000 HSBC US tracker fund is now charged at £90 p.a. rather than £24.
Time to consider switching from passive funds (& investment trusts) into ETFs, perhaps.
HL have a special page about how the new charges affect passive investors:
http://www.hl.co.uk/lowcharges
Same link as Jonny posted but then you need to click on the “Passive funds” tab to read the following:
“One aspect of the new FCA rules specifies that we must apply the same charge for all funds. Therefore, we are removing the existing flat £1 or £2 per month platform fee currently levied on a number of index tracking and other funds, and applying the same low cost tiered tariff across all funds.
This means most investors with smaller passive holdings will be better off. Investors with larger passive holdings may pay more. On average, a typical investor who holds two passive funds will only pay more if their combined passive holdings are worth more than approximately £10,000.
To help offset this, or save clients with smaller passive holdings even more money, we are introducing new ranges of super-low cost index tracking funds from Legal & General and BlackRock, with annual management charges starting at just 0.06%.
Full details of the new range of super-low cost trackers will be published on our website on 1 March 2014. If you are interested, please register for our index tracking service and we will send you an email as soon as these details are available.”
I think this demonstrates why some of us are quite happy sticking with ATS. They remain (I think) the only capped broker offering the full range of Vanguard funds, and by far the cheapest option for a larger fund portfolio. On a £100,000 portfolio their dealing and ISA account fees amount to 0.09% and their SIPP fees amount to 0.18%. Their children’s accounts are even cheaper.
I suppose its just possible that for a £250k plus account (and it seems that the lower tier fee for HL only kicks once this is reached in each account separately), Hargreaves Lansdowne MIGHT be competitive using their ultra low cost trackers vs an ATS Vanguard portfolio. Looks like we won’t know until March though.
Time to look again at interactive investor I think…
HL new charges still seem pretty good for smaller SIPPs as there appears to just be 0.45% charge and no extra SIPP platform charge as levied by most other platforms. “Pretty good” is still means 3 times what I used to pay, but reasonably competitive going forwards.
Nothing meant personally etc at the person making this comment at all, but I’d just like to make an observation for anyone hit by any of the unfolding charges across the different brokers over the next few weeks.
If you read Monevator, invest in the lowest cost and most effective index tracking products you can find, select your brokers on the basis of bringing down charges even further, AND consider moving whenever the charges change, then you very definitely are not and cannot expect to be “most investors” . 🙂
Most investors still buy expensive managed active funds, pay little attention to fees, don’t benchmark their returns properly, listen to inappropriate advisers like banks or splashy advertising supplements — even if no-longer sneakily re-numerated IFAs — and don’t even know they might think about moving their investments, let alone consider it.
So most Monevator readers are nothing like most investors — which is why you have already put yourself in a great place by seeking out the best solutions etc.
Given that, you can’t expect the likes of HL to be talking about you. 🙂
I think it’s important to remember the big picture, that is most passive investors here who’ve done their research are paying relatively tiny fees for the — on average — best investing solutions that give them a very broad exposure to the world’s asset classes. So I’d not be downhearted by a tweak in fees. By all means consider moving your money if it’ll save you some tens of basis points and you want the lowest charges possible, but understand you’re playing in the elite league of cost-cutters, and you can’t expect life to be easy.
Last time I wrote a message like this someone angry came alone and told me that 0.1% on their fund was worth some hundreds of pounds a year that (s/he opined) “might not be meaningful to you but is very meaningful to me!”
But I stand by my comments. Financial services companies are going to try to make money for the services they provide. The first decision to go passive and diversified is for 95% of people the best and crucial decision. You’ve already won versus a majority of peers, and versus “the industry”.
After that, it’s sport! 🙂
I think it will be if you have under 5350 per passive fund and you are better off, above that are you are not. Good for a few of my holdings not for my main lifestrategy which will quadruple in fees.
I have a couple of Vanguard funds with HL. 0.45% is an 80% increase in costs for me. With YouInvest, I have one active ethical fund. Given the amount currently invested, it will be a 93% increase in costs.
@Steve: Thanks, it’s definitely worth considering. However, I have an ISA and a SIPP, so that would be £1.50 per month, + £45 per year for each, which at the moment is still coming out just higher.
@ The Investor: I’m going to take that as a complement (much in the same way my wife often tells me I’m a ‘special case’ whilst nodding sympathetically ;-)).
It’s really disappointing to have charges triple (and as a low-cost passive index tracking investor, it seems so wrong to be now be paying 0.77 to be investing in a LifeStrategy 80% fund [0.32% fund AMC + 0.45% HL Holding Fees ] ).
In a few months I’ll certainly review switching, though not until the dust settles.
On a plus note I suppose I can now have hold additional Vanguard (or other) funds without extra platform charges (something which has previously limited me to a single Vanguard fund per account) – though even this will need extra consideration as to the extra costs involved in holding multiple funds should I ever want to switch out in the future.
@Jonny — Absolutely, that’s the spirit in which it’s intended. And if I were you I’m sure I would be commenting on this thread and probably looking to switch given that increase in costs (after waiting for the dust to settle!)
But let’s remember — nay celebrate — our “special-ness”. 😉
For larger portfolios there just seems an inexorable logic in switching to ETFs.
Why should holding £0.5m (say!) of Vanguard Dev World ex UK & Vanguard UK funds costs you £1,750pa, but switching to VWRL and VUKE cost £200 in a SIPP, £45 in an ISA and £0 in a taxable account!? Obviously add trading fees to that.
btw I asked HL would they waive exit charges and they replied that they had legal advice that because the changes were due to regulatory issues the existing contract was valid and exit fees applied. They were however holding off increasing those fees (for SIPP and +£25+VAT per account) till June. Nice of them!
That said best not to react hastily…
With c£280k in three low cost Vanguard trackers with HL & £65K in one fund in my ISA, plus another £200k to be transered in shortly HL fees change will take a massive additional bite out of returns. As soon as I can identify the cheapest secure alternative I am off.
I’ve got a low-cost tracker with HL in a SIPP, and my total charges will go up some 150% because of this change. But if I switch to one of these 0.06% low-cost funds, then they might only double.
You have to wonder though… 0.06% for doing the hard work of actually running the fund, and 0.45% (so almost 8 times as much) for doing a little paperwork and running the website allowing to make changes. Stinks!
@helfordpirate – I am not with HL but it seems that platform fees post RDR are definitely going to favour ETFs. Some of the ETFs have quite high ongoing charges though and I am weighing carefully (ok, dithering) about whether (and where) a clean class non-vanguard index fund portfolio might be cheaper in the long run.
But maybe I’m falling into the trap of agonising over the last 0.1%…
@Jonny – I have a little bit of good news for you in case you hadn’t heard: Vanguard are reducing fees on their LifeStrategy funds, so for the 80% fund you will pay 0.29% AMC + 0.17% dilution levy from 31st January.
https://www.vanguard.co.uk/documents/portal/press_releases/vanguard-to-lower-charges-on-lifestrategy-funds.pdf
To be clear, I think what I am saying is by all means look to take another 0.1% out of it, but don’t agonize over it. Nobody should be bemoaning their fate this morning. They should be congratulating themselves for being engaged investors, and wondering what to do next.
You’re already well ahead in the game (as you of all people know! 🙂 )
To those talking of quadrupling charges or applying ten basis points to six figure funds, I’d again warn not to fall into the sensationalist trap used by the other side (financial services) in other contexts.
Financial services firms are going to try to get their extra 0.5% one way or another, whether active, passive, sneaky charges, holding charges, cross selling, funds of funds, superfluous discounts that aren’t really discounts, etc etc.
It will always require a bit of work, effort, and gamesmanship to try to stop them. Hence I say sport!
@Charlie:
HL platform charges for holding shares/etfs/ITs, old:
ISA – 0.5% (capped at £45)
SIPP – 0.5% (capped at £200)
HL platform charges for holding shares/etfs/ITs, new:
ISA – 0.45% (capped at £45)
SIPP – 0.45% (capped at £200)
For those wanting to compare the new charges to the old charges check out the broker comparison page as a first port of call!
On a separate issue: I’m not tempted by iii at all. One, I don’t trust them. Two, I can’t see their pricing model staying as it is. They were one of the first movers so a change would not be unexpected.
On another separate point: I’ve been increasingly moving towards ETFs and the changes at HL don’t really affect me because of this. I’m not sure how long funds have got whilst the benefits of an ETF portfolio become stronger.
Finally, I agree with what TI says above. It’s disappointing of course. But we shouldn’t lose perspective that we are doing very well. 2013 was an excellent year. And in general, more people are seeing the light when it comes to low-cost diversified portfolios. We are the future!
I must apologies for being sensationalist, TI beat me to it but i was going to say i was a bit silly in doing this. I hate sensationalist stats and there i was being a dog at it myself. Since giving up all news 6 months ago you would have though i would know better. Best of luck one and all.
@ L
Yes, but they have split out Investment Trusts, so another £45 cap applies!
Another plus that I briefly referred to in my previous post (but didn’t specifically mention) is there’s now a monthly share builder option (£1.50 per month, with a minimum £50 investment) which HL didn’t previously have.
May be good for those using ETFs (or tut-tut active stock pickers ;-))
Been looking to do some structuring on my investments and have been following this with interest. And holding tight until the dust settles… Which prompts a stupid question from the layman.
When is it that said dust will begin to settle? Are there any plans or rumours to further tweak the transparency of costs?
Hi there,
This probably isn’t in the right place, but here goes. I have a shares ISA with Alliance Trust who used to allow the purchase of US shares for an ISA, but have suspended this. They also allow the purchase of Vanguard funds. Unfortunately with Alliance Direct you can’t easily see on one page what you paid for shares or funds and what they are worth now.
I was interested in Charles Stanleys low charges mentioned in the article, so I contacted them. They also allow Vanguard funds, but not US equities. You can see your profit or loss on one page with them.
Does anyone know of a shares ISA provider who provides the following:
1.Access to Vanguard funds
2.Access to US shares
3.The ability to see on one page the profit or loss for each assett
4. Low charges ?
Thanks
The one area where Hargreaves Lansdown look cheap now are fund only SIPPS below about 40k. Up to that point the Hargreaves Lansdown platform charge of 0.45% for SIPPs is cheaper than the likes of Youinvest, ATS and Trustnet Direct because there is no separate fixed administration charge.
Actually that’s not quite true as at the 8 -10k fund portfolio level Youinvest are very marginally cheaper until their admin charge increases from £20pa to £60pa when the 10K point is reached and HL are cheaper again.
But when you factor in dealing costs (or lack of them for HL funds) that makes HL look very good value for SIPPs at every point below 40k and even a bit above especially if you buy and sell a lot.
However if your SIPP fund is below 40K but anticipated to go well above 40k in the future, then you will need to move elsewhere at some point (when the 0.45% charge becomes expensive) and you have to factor in exit costs (closure fees/re-registration charges/ transfer charges).
@neverland
To reply to your question ATS are still a good option for me (despite the price increase) because my ISA funds portfolio is of a size that fixed fees are better than percentage fees, and I don’t buy or sell much so dealing costs don’t amount to much. I think the only scenario where I have a problem is if I die when the £240 death claim cost kicks in. I’m working on the basis that I will have other things to worry about if that happens.
Had the completed HL transfer form for a decent chunk currently in expensive funds elsewhere for a couple of trackers on my desk waiting for this, it’s now in the bin. Hopefully the dust settles soon, new years resolution was to actually do what has been on the to do list for years 😐
Interesting colour-coded table here that purports to show the size/cost sweet spots of quite a few of the execution only brokers:
http://www.citywire.co.uk/new-model-adviser/the-good-the-bad-and-the-pricey-how-hargreaves-charges-stack-up/a728205?ref=new-model-adviser-picture-galleries-list#i=5
I’m not vouching for accuracy (or inaccuracy) but may be worth a look.
Let’s wait to the 1st March when they release the new fund charges before we jump to rash conclusions and transfer our holdings!!!
away from HL (I should have added)
Little Sir Echo asks: does anyone know of a shares ISA provider who provides the following
1. Access to Vanguard funds
2. Access to US, Canadian and Australian shares
3. Cheap purchase of a wide range of gilts (not just the most commonly traded)
3. Low charges overall ?
So for those of us who hold both shares and Investment Trusts in HL our fees are going to double!
Investment Trusts are shares anyway so there is no logical reason for this change other than to make more money for HL/encourage people to sell their Investment Trusts and buy Unit Trust instead?
J
In relation to conversions to clean classes, the article correctly says that: “You are not liable for Capital Gains Tax when your fund converts, even if you aren’t sheltered by an ISA or a SIPP.”
However, just a reminder that this does not apply if you carry out the switch yourself, by selling the dirty class and investing the proceeds in the clean class. The bed and breakfast rules would not apply, because you are not buying the same shares as you sold. This would trigger a gain and would be taxable, if your gains for the year exceed the annual allowance.
@ stuart/dearieme
I recently asked Charles Stanley (week or so ago) about US stocks/funds within ISA. As you say they don’t offer them at the moment but did say it is something they are looking into offering and may well do so in the future, if and when that happens, who knows!?
I’m not sure what tax issues this would raise thou on the US side? I seem to remember some conversations about this on previous threads?
@ stuart/dearieme
TD have allowed US shares in an ISA in the past (from experience). I’m not sure of their current position.
@ Investor #40 – thanks, that graphic is a lot easier to understand than your comprehensive broker comparison table.
I can no longer see the statement for passive investors which I copied from the HL website this morning in post #18. Not sure if I’m looking in the wrong place or if they’ve taken it down for some reason – do they read Monevator?
I asked them about their exit fees and they told me:
“Presently, our charge for transferring a Vantage Stocks & Shares ISA or a Vantage Fund & Share Account to another provider is £25 per holding. Cash is not counted as a holding; however you may incur a dealing commission on the sale of any investments. For transferring a Vantage SIPP to another UK provider the charge would be £75. For transferring to a non-UK provider, this would be £250.”
So the exit penalties aren’t huge and you can avoid them by selling your funds fee-free and transferring cash instead (although then you’d be out of the market for a while).
Another issue concerns me – am I going to see an automatic “conversion” of my low cost trackers into the new exclusive-to-HL versions, which would then make transfering out impossible without selling every fund as they won’t be available anywhere else?!
@BeatTheSeasons – your original link still works, but then you need to choose the “Calculator” tab, then choose “Passive funds”.
I’ve created a spreadsheet which I have uploaded into google docs which enables a comparison of platform costs to be made for a given portfolio of clean funds and shares and ETFs. It allows for the recent HL announcement
It is very much a prototype, so there will be some errors in it, but here it is (hope it is OK sharing this).
https://drive.google.com/file/d/0BxA6Przq6KI1ZTI5R3c2UjdPNjA/edit?usp=sharing
You can download it into excel (not sure how well it will download into other applications) and then enter your portfolio in the yellow shaded date inputs to show comparative platform costs. There is a funds and shares and ETF, shares and ETFs only, and funds only results table to enable options to use different platforms for different parts of the portfolio to be explored.
The basic principle on which it relies is that fund mangement costs are assumed to be the same for different platforms therefore it is only necessary to compare platform costs.
Unfortunately it doesn’t allow for regular investment or dividend reinvestment.
I hold Vanguard LifeStrategy 100% Equity Acc in a HL ISA and today’s prices mean it’ll cost me 0.33% + 0.45% = 0.78%.
On the other hand I can hold it with Halifax for 0.33% + £12.50 a year: http://www.halifaxmarketwatch.co.uk/cgi-bin/digital/security.cgi?username=&ac=&id=2569238
Am I missing something or (for me) HL is now a ripoff compared to Halifax?
@Snowman
Looks very good. HL are claiming (http://citywire.co.uk/wealth-manager/why-hargreaves-lansdown-rejected-0-2/a728267) that the Wealth 150 (actually about 90 funds) will average 65bp AMC, whereas I think it would be more like 75bp with the other platforms in the spreadsheet. They are also claiming very little change to the funds in the Wealth 150. So, if you are happy with the Wealth 150 funds, the net HL charge might be 35bp, rather than 45bp.
Having come home and read the full Hargreaves Lansdown leaflet I see they’ve decided it’s “a good day to bury bad news”.
Although their response today which I posted in #49 is technically true, they are in fact going to charge £25 to transfer cash out to another provider from 1st June onwards.
There is also going to be an annual £25 charge if you haven’t chosen their paperless option. This will apply if you receive one of their six monthly statements – but the junk mail promoting their Wealth 150 funds will remain free of charge!
@ivanopinion
From a purely passive perspective ( I won’t comment on HL’s fund lists generally for fear of offending) it is not clear from the announcement if HL have genuinely got some superclean trackers from Black Rock and Legal and General. They are very vague about the 0.06% (which is presumably the AMC not OCF) but at the same time I can’t see any existing Black Rock or L and G clean class tracker (even the gilt funds) with an amc that low so perhaps they have.
I can’t see it making any material difference in comparisons, given HL are so uncompetitive on platform charges except for possibly SIPPs around the 50K level or below where HL look quite competitive.
@BeatTheSeasons – Just been reading the booklet myself. It does sound like active funds will be cheaper (I hold one which is doing rather nicely), but passive investors will pay a fair bit more (I was quite happy with low fixed £2 platform fees for my Vanguard funds). At least the Vanguard LifeStrategy fund fees are dropping in price as mentioned by @Charlie (along with a holdings shuffle). If only they waived the dilution levy too 🙂
It will be interesting to see the 0.06% L&G and BlackRock funds. It also looks like a new 1% (£1-£10) automatic income reinvestment fee has popped up too.
Eagerly awaiting announcements from other brokers and roll on March…
@Snowman and CisforV
I imagine the L&G and BlackRock funds will be of a similar flavour to the deal HL has with SWIP for the low cost FTSE tracker.
Still don’t think that is going to be good value for money compared to the lowest cost ETFs or funds on cheaper platforms.
“HL are so uncompetitive on platform charges except for possibly SIPPs around the 50K level or below where HL look quite competitive.” Well, that’s all right then. 🙂
Agree with earlier comments that HL are now only really competitive on <£40k-ish SIPPs. For small ISA/taxable portfolios Charles Stanley looks the best at the moment at 0.25%.
Not many good options in the £40-100k range though. Interactive Investor perhaps, but like others have said pricing might be unsustainable. Also worried by their relatively small size – £5m net worth, £58k in cash (http://companycheck.co.uk/company/03699618).
The situation probably necessitates a move to ETFs somewhere with free custody. This is probably what I'll end up doing, unless BestInvest give me a reason to stick with them when they announce post-RDR fees. Here's hoping!
Sorry had to change that link to the google docs platform comparison spreasheet. Here is an updated link
https://drive.google.com/file/d/0BxA6Przq6KI1cWxZUTdIUWR0YVU/edit?usp=sharing
Hello. Long time lurker first time poster! Love the site and it’s helped me no end in starting my investment journey.
I’ve received an email from Halifax regarding their post rdr position. They are converting customers to clean class funds from the end of January and from 31st March will charge £12.50 per online trade. Any customer wanting to move their funds to another provider can do so free of charge until 5th April.
They haven’t mentioned any changes to the £12.50 p/a ISA fee or the share builder regular purchase scheme which is £2 per trade.
According to one poster on MSE forums they are due to expand their vanguard life strategy offerings to include the bond mix versions but I haven’t had chance to check this myself.
Can’t help feeling that I’m missing something though as £12.50 p/a ISA fee and £2 regular trading / £12.50 normal trade seems too cheap given the competition’s pricing models.
@snowman thank you for the spreadsheet; much appreciated.
Also +1 for being able to subscribe without commenting.
@ Snowman – I’ve always interpreted that Interactive Investor SIPP exemption as the SIPP account doesn’t pay £20 per quarter. I would have thought that someone with a iii ISA on top of the SIPP would pay the SIPP charges and the £20 per quarter for the ISA. Can anyone with a iii account confirm one way or the other?
@ Big Dave – this is it for now. This is proving more than enough for the industry to swallow.
@ Stuart – take a look at Youinvest.
@ Beat #49 – that’s cos they’ve boiled the situation down to someone making 10 trades a year from an ISA, and skipped various other wrinkles. Tough luck if that’s not you.
@ Julio – yep, you’re missing something. Halifax have yet to announce their new charges. They will be affected the same as everyone else. Just hang on until everybody has revealed their hand.
If HL’s vaunted 0.06% trackers are UK index funds then they will still cost 0.51% versus 0.4% at Charles Stanley (0.25% + 0.15% Vanguard UK index fund or Royal London’s All Share tracker, which is slightly cheaper still). Snowman makes the excellent point that the 0.06% may well refer to AMC too. HL tend to talk in terms of AMC rather than OCF which is sugaring the pill somewhat.
Broker comparison table updated with new moves from HL, Cavendish and iWeb:
http://monevator.com/compare-uk-cheapest-online-brokers/
Don’t know what to make of iWeb though. Seems too good to be true, like when TD Direct offered clean funds without a platform fee for a few months.
Anybody know if IWeb or Halifax Share Dealing have already made RDR pricing changes?
IWeb: £25 account opening fee, no platform charges and £5 dealing costs for all asset classes.
http://www.iweb-sharedealing.co.uk/share-dealing-home.asp
Halifax: No account opening fee, £12.50 annual platform charges and £11.95 dealing costs for all asset classes
http://www.halifax.co.uk/sharedealing/our-accounts/
@ The Accumulator – you beat me to the punch re IWeb. Thanks.
This is the announcement from iWeb: http://www.iweb-sharedealing.co.uk/fundchanges
the 0.06% is indeed AMC, not TER/OCF. this is in the analyst presentation PDF on HL’s site (under investor relations), which gives 4 examples of new discount prices, 1 of which is passive:
Legal & General UK 100 Index
dirty AMC: 0.65%
standard clean AMC: 0.15%
HL clean AMC: 0.06%
standard clean seems to have an OCF of 0.19%, so presumably HL have an OCF of 0.10%.
they seem to be saying they have special pricing from both L&G and blackrock. which is all very well, but it’s not enough to make up for paying 0.45% to HL.
@ The Accumulator – Thanks for posting the IWeb link. Just dawns on me I’ve already seen that page! My head is swimming with this RDR stuff!
Re Halifax – There’s a post on the MSE forum which indicates their only change will be to charge £12 for fund purchases, but I haven’t seen an official announcement of the proposed changes.
http://forums.moneysavingexpert.com/showthread.php?t=4865170
Oops. Typo. Halifax apparently to charge £12.50 dealing costs, not £12, for clean class funds.
@ the accumulator
Re interactive investor I was going off
http://www.iii.co.uk/shares/charges
where it says
Please note: All SIPP Account holders will be exempt from paying our Quarterly Fee
I’ve changed my mind a few times on what that means (does it mean SIPP only customers, or SIPP + dealing + ISA customers)
so I could be wrong.
Would be intersting to know the answer
@ Grey Gym Sock – Great sleuthing! This 0.06 figure is being used as a headline grabber but as always the devil is in the detail.
@ Snowman – I’m going off the same thing. Great minds think unalike!
@ TCA – it’s interesting to note that iWeb and Halifax are both in fact Halifax. Halifax has always been the comparatively expensive brand name and iWeb the cut-price cousin. I’d be surprised if there wasn’t more to this story, especially with Halifax Stockbrokers, because they’ve never been particularly competitive.
I would definitely give it a several months before throwing my lot in with anyone I think, there’s a lot of jostling still to be done.
Hi – not that I’m being lazy but has anyone worked out the most cost effective way to hold Vanguard Life Strategy funds since HL have added 0.45% to the cost, which (as Julio has said) brings the annual charge up to around 0.76-0.78%. This no longer makes them that cheap in comparison to some of the active funds HL now offer (not that I would consider switching to these).
How about switching to Vanguard directly if you have a SIPP with over £100k in an Life Strategy fund? I shall make some enquiries and post the results.
As a relatively large ATS customer lethargy is looking a very attractive option and is always my default position anyway
Sure my fees will have tripled/quadrupled over two years now, but it doesn’t look as if any of the cheaper options are eithermuch cheaper (you invest/Sippdeal/whatevertheyare callednow) or sustainable (iii.co.uk)
Oh well – fell at the first fence! Vanguard do not offer SIPPs nor ISAs – you probably could have told me, I know…
As a bit of info, Vanguard have lowered all the charges on Life Strategy funds: https://www.vanguard.co.uk/documents/portal/press_releases/vanguard-to-lower-charges-on-lifestrategy-funds.pdf
So it may be best to take Neverland’s approach and adopt further lethargy – seems such a price hike though for those of us who were looking to avoid all those “active management” charges.
@ The Accumulator
In the spirit of TCA’s earlier comment, would it be possible to update the http://monevator.com/compare-uk-cheapest-online-brokers/ page to indicate when the data for each provider was updated? I see there’s references to months there, but it’s not always clear what year it’s referring to!
@grey gym sock
That is an (unbelievably) excellent spot.
This is why this site is so good. Could not imagine seeing such an excellent eye for detail amongst the contributors and comments in MSM.
re iii – since they only charge one quarterly fee regardless of number of linked account, my reading was that if you hold a SIPP, you will only pay the (higher) SIPP account charge, but no other account charges.
It does seem a bit cheap now (oh the irony given the outrage when they introduced the charges…)
Regarding Vanguard Lifestrategy funds – as well as reducing costs, they are changing the asset allocation. UK equity allocation will be reduced (but remain ‘slightly overweight’) and international bonds will be added. Not sure what to make of that. Not very impressed that the detail appears unavailable on their website, and they have not responded to my email to them two days ago asking for clarification.
At the risk of bogging down this superb comment thread with some PR waffle, Hargreaves Lansdown emailed me (and I presume the mainstream press) some follow-up about the sorts of points being raised here.
These are the thoughts of Danny Cox, Head of Financial Planning, FWIW:
The comments about investment trusts are a bit curious — IMHO they would do themselves a favour if they said “we need to strike a balance to preserve our profit margins”. I haven’t got a problem with that — it’s a free market, and we’re free to walk. But clearly a share is a share, whether it’s an investment company or a supermarket.
A lot of the quirks in these pricing structures that are coming out are seemingly designed to stop the likes of us “gaming” the tariffs by finding loopholes (e.g. The regular investing schemes of some brokers and their £1.50 dealing charges that canny investors can use for one-off purchases).
Can’t blame them for doing that, but equally they can’t blame us for continuing to look for the most profitable ways to invest. 🙂
Thanks TI, looks like you’ve really made it, and that also answers my question about whether they read Monevator!
This is a really key point – looking at all the other platforms which appear more competitive at first glance, the savings could quickly get eaten up if you re-balance half a dozen funds on a quarterly basis for example.
So here’s a question. I know I could ask HL, but I’m starting get a little kranky and sarcastic, so I’ll try here first instead …
Is British Land (BLND) an Investment Trust? Its a REIT so I thought that was a type of IT.
Is Ruffer Invesment Co (RICA) an Investment Trust? Ruffer’s website says “as the investment trust is traded on the LSE…” so it sounds like an Investment Trust.
Neither of these two shares is included in HL’s list of ITs.
ALthough maybe being with a broker that charges dealing fees is a good psychological barrier to overtrading! No need to rebalance more than once a year I wouldn’t have thought…
But it does make it harder to make a clear comparison across offers. And saving £70 is not a vast amount with an uncapped platform fee and a large portfolio…
I agree that the reasons given for the separate IT charge are somewhat disingenuous. Clearly the problem is that IT holders don’t trade as much as people who trade individual stocks and therefore they don’t generate as much revenue as other shares.
@ Beat – except that Charles Stanley and TD Direct both offer £0 trading for funds and a lower platform fee.
@ Sam – The table is fully revised every three months and is revised ad hoc whenever I – or the rest of the Monevator massive – finds out that something is changed. So it’s pretty much up to date at the mo, though no doubt I’ve missed something, somewhere.
TA – thanks for updating the chart – a big task at the moment!
You have iWeb as still commission funded, but I thought they were transferring to clean class at the same time as introducing the £5 fund dealing fee?
To answer my own question (#81), HL now have a PDF list of available Investment Trusts, which clearly states than both BLND and RICA are ITs. The PDF is dated 14/01, and either it wasn’t there yesterday or I missed it.
(http://www.hl.co.uk/__data/assets/pdf_file/0004/7802275/Investment-trusts-available-through-Hargreaves-Lansdown.pdf)
@TI Good comments about we are all already ahead of the game and not to “agonise” over costs..
My view on the latter is that analysing and optimising costs is, with good tax optimisation, the only two things I can do to improve my return without adding risk. So I do them as much as I can!
And psychologically I am a detail person, an analyser and frankly a “fiddler” – better to channel that on costs and tax than fiddle with my portfolio where my rational self realises such action is likely wealth-destroying!
Sticking to ETFs in the HL SIPP does not seem like a bad option for large established portfolios.
Fixed £200 pa custody fees, plus whatever charge for holding the fund. For a £100K portfolio you can keep total fees very low. Vanguard FTSE 100 ETF (VUKE) fee 0.1%, plus 0.2% custody fee = 0.3%. And that will get smaller with capital growth… hopefully!
Am I missing anything?
Lemondy, I don’t think you’re missing anything – a taxable dealing account with ETF only portfolio is even cheaper!
But at the moment I’m looking for another place for funds (OEICs) apart from ATS, which seems to be a much taller order…
there is also the small wrinkle about forex charges to convert some ETF dividends (like VWRL) which adds to the total costs of ETFs
vanguardfan, thanks! But tell me Vanguard don’t pay USD dividends on the GBP share class for their ETFs!? That is… interesting. Is there any write-up of that, how do brokers handle it? And here was me eyeing up the TER on their S&P 500 ETF.
yes I’m afraid they do! There are a couple of informative threads on motley fool (one I found linked to from comments on here – a post on vanguard ETFs I think).
There is also variability in how much brokers charge for comversion, and how transparent they are about it…
Why does everything have to be so complicated…
Got my calculator out and then thought why am I doing this now?
I can’t invest more money tax free till after 5th April and I don’t have all the information yet. Also transferring costs in more than one way and my experience transferring last year was not good. It took ages and they didn’t read (either end) that I only wanted some investments transferred. In all I was unable to trade for over three months on the transferring investments and the wrongly transferred ones. Praise to iWeb and thumbs down to Barclays Stockbrokers, SelfTrade, Fidelity and M&S Money.
My gut says if there is some where better it will still be there in three months and I’ll look for offers to pay some of my transfer costs if it is that good. Methinks I will just start with new money at the better broker (if there is one for me) and re-balance across all my brokers to hold the most efficient class of investments at each one.
Feet back up – passive again.
Re. the new separate HL charges for ITs.
I have both a SIPP and ISA with HL. Am I now correct in thinking that I should have only ETFs/shares in the Sipp, and only ITs in the ISA (or vice versa) in order to avoid potentially doubling my fees?
mameyama: could it even be worthwhile to dump ITs while you remain with HL? This might be a good moment while the discounts are so low.
Here’s an article suggestion: It seems like the Vanguard Lifestrategy funds are very popular nowadays. It would be interesting to see how we could replicate their contents with ETFs instead. I’m currently trying to build a virtual ETF portfolio based on the 80% equity fund for my HL SIPP account. If successful I would consider staying put rather than moving elsewhere because I do like HLs website and iPad app. I’ve so far looked at all available Vanguard GBP ETFs.
@ NG – here’s an article along those lines: http://monevator.com/etf-only-portfolios/
It was written earlier in the year so replace the stuff about Sippdeal with Alliance Trust or Interactive Investor. Some of the figures will be slightly out of date but the principles remain the same.
@ Mameyama – spot on.
@ Vanguardfan – iWeb currently resides in the ‘too good to be true’ category for me, so I’m leaving it where it is for a little while. I’ll contact them directly and try and get some clarification.
Other than the self-serving tosh attempting to justify the investment trust change, I think HL make some good points. Not that it will induce me to go back to them (having transferred out several years ago), but they have made it clear that their target market is not someone like me or probably most people who read this website.
@NG – It would be interesting to see what your Vanguard ETF looks like.
Have you factored in the cost of the bid-offer spread when changing over from tracker funds to ETFs, plus the dealing fees to buy each ETF?
There seems to be a consensus forming on this thread and elsewhere that Interactive Investor fees are now looking too good to be true, so they will inevitably hike them. I’m not necessarily disagreeing, but I do wonder if they continue not to announce increases, how long would it take until people accept that perhaps there will not be an increase? Perhaps if they do not intend to make an increase, they ought to make an announcement about that. (However, the risk is that a promise not to increase fees for, say, two years is interpreted as meaning that fees will almost certainly rise in two years time.)
This is probably just wishful thinking on my part, but I do wonder if they might be doing better out of dealing charges for funds than is generally imagined. If you do a small amount of rebalancing and you make a few purchases using new money, for instance to use your ISA allowance, it would be very easy to clock up, say, a dozen purchases or sales, which would often mean fees of £120. I’m not saying there aren’t ingenious ways of avoiding/reducing such fees, but I do think that probably most investors (who don’t read this website) are paying the full £10 per trade. And I would guess that although many people who read this website might think that 12 trades per year is high, many other investors might trade much more than this. So, perhaps, Interactive Investor is adopting a strategy of attracting as much investment as possible, on the grounds that this will lead to more trades and therefore more income.
Like most, I shall be waiting for the dust to settle before I decide what, if any, action to take.
Since one can split one’s existing ISA investments across more than one provider, if, like me, you have mainly low-cost Vanguard funds but some active/absolute return funds and investment trusts, then it may make sense to hold the low-cost funds with one provider and the higher cost funds with another.
If potential savings are only .1% or so, I probably won’t bother doing anything. Transfer and account closure charges also have to be factored in not to mention non-monetary issues such as quality of service, confidence in the long-term viability of any potential new provider, research tools provided, web site usability and so forth.
Like a few have discussed, I’ve weighed it up and it doesn’t matter how cheap the H-L exclusive rate tracker funds that arrive March are, I will be moving to a 100% ETF strategy from now on, Vanguard and iShares mainly, in ISA and SIPP.
The £45 and £200 caps mean the effective H-L charges become acceptable at a certain point which I have reached, and will become more reasonable over time. So won’t be moving, but they won’t be milking me too much either.
The plus of the new charge structure is you are not penalised for holding a number of funds/ETFs. Will just replicate my current asset allocation with ETFs and rebalance via new contributions quarterly or bi annually.
Hmm, having looked at the langcat posting linked to by HL, it is pushing it to conclude that it shows “we are competitive to the majority of clients who have less than £100,000”.
What it actually shows, at least for ISAs, is that for ISA pots of £50k or lower, HL will cost you “only” 80% more than the cheapest. How Mark Polson can colour that green is beyond me. For bigger pots, the differential is even bigger.
HL does, however, look good value for SIPPs of up to around £50k, as Snowman has been saying.
I’m another one mulling the merits of ETF vs fund base strategy. My estimate is that the ongoing charge of an ETF portfolio might be about 0.1% more than a fund portfolio, basing my fund portfolio on HSBC class C funds. I can’t find a cost-effective Vanguard fund provider apart from ATS, and I’m looking for another broker. The real downside for me is the lack of a non- vanguard global index fund – I really don’t want to have to buy 6 regional funds to roll my own! Then again, perhaps a bit of diversity away from Vanguard would be prudent…
Apologies if this is on the wrong comments section. I’ve just spoken with Halifax regarding their post RDR fees after receiving an email from them earlier this week. They have confirmed that their platform fee will be £12.50 for a stocks and shares ISA. Anyone who has a legacy funds ISA account will be converted to the stocks and shares ISA in April. It will cost £12.50 per trade or £2 if you use the scheduled purchase scheme. The agent confirmed there were no other costs and no inactivity fee. All dirty funds will start to be converted to clean class at the end of January. They did attach a timetable but the vast majority of funds have TBA next to the conversion date. He could not confirm if they are extending the Vanguard range of funds from the current three.
This seems unbelievably cheap seeing as other fixed fee platforms are at least £80 per year. Too good to be true?
Apologies. That platform fee is £12.50 per annum.
@Gareth
Perhaps too good to be true, or perhaps they think that £12.50 per trade will be profitable, overall.
@Vanguardfan: “the ongoing charge of an ETF portfolio might be about 0.1% more than a fund portfolio.”
Are you sure? For example, 80% VUKE and 20% HMCX pretty well replicates the FTSE all-share, and comes in at 0.15% overall. That exactly matches the HSBC class C FTSE all-share fund. For US the picture is even rosier — VUSA is 0.09%, whereas HSBC class C S&P 500 fund is 0.15%.
Because around 50% of a global fund is US, it is possible to synthesize a global portfolio with six ETFs (five from Vanguard, one from HSBC) and with lower overall cost than any fund combination that I can find. I am seriously considering doing this. The down side is that I will have a half dozen ETF holdings to juggle and (at some point) rebalance, but on a decently sized portfolio the cost saving is visible relative to even the best funds. And of course, no specious funds platform fee to bother about.
Interactive Investor have just announced they have no intention of changing their pricing. Good news.
@jumper – I was calculating in the basis that I would be using VWRL and perhaps some other income/small cap focused ETFs, which tend to have higher TER. But you’re quite right, the regional ETFs are much cheaper and if I am going to have to use regional funds anyway, then the relevant choice seems to be between cheaper regional ETFs and VWRL. Thanks for helping me take a fresh look!
Would anyone feel concerned about holding too large a proportion of their assets with a single fund manager?
@rileyceo
I assume you received the same secure message as me:
Dear ivanopinion
In response to press speculation and customer enquiries following the introduction of new charges by some other investment platforms, we are pleased to confirm Interactive Investor will not be increasing our current pricing, introduced in 2012, and we have no plans to introduce any additional fees.
As our pricing is already transparent, fair and straightforward, it is fully compliant with the forthcoming regulatory changes. You can continue to invest for a straightforward, fixed fee – regardless of investment choice. You can still hold both an Investment account, as well as an ISA account, for the same £20 quarterly fee, with its £20 quarterly commission credit. Our pricing also ensures you will always know exactly how much you will pay in charges.
If you have additional holdings elsewhere you may want to consider transferring them to us. This straightforward process takes just a 15 minute investment of your time, and we will look after the rest of the process for you. All the transfer forms you need can be found within the Account Admin section. You will also get £120 in trading credit (terms apply).
Yours sincerely
Adam Seale
CEO
Interactive Investor Trading Ltd
Terms and conditions of transfer offer
A minimum transfer amount of £3,000 is required to qualify for this offer.
To qualify for this offer, we will need to receive your transfer forms by 28 February 2014.
The £120 commission credit will be added to your account in four, quarterly, instalments with the first credit of £30 being applied at the start of the next quarterly credit period (our quarterly credit periods start on 4 January 2014, 5 April 2014, 5 July 2014 and 4 October 2014).
This offer is capped to the value of £120 of additional commission-free trades, per customer.
All quarterly credit, including the transfer-offer commission credit, must be used up in the quarter it is added to your account. Any remaining commission credit will be removed from your account at the end of the quarter.
The commission credit is applied to your overall account and can be redeemed against any trading fees you incur within your investment, ISA or SIPP account held with us (trading fees are charged at £10 for real-time UK and international trades and £1.50 for regular investments).
The commission credit is in addition to the £20 quarterly credit which is applied to your account together with your £20 quarterly account fee.
Your account must remain open for twelve months following the transfer to receive the full £120 in commission credit. Accounts which are closed during this time, will lose any outstanding commission credit.
Interactive Investor reserves the right to amend or withdraw this offer at any time.
@Vanguardfan: “Would anyone feel concerned about holding too large a proportion of their assets with a single fund manager?”
Not really. I’m aware that I do, but it doesn’t worry me. For a start it’s Vanguard, and they are huge. Secondly, even if Vanguard were to implode I would still own the underlying stocks that my funds owned. It’d be a hassle to unwind, but if Vanguard were to implode I suspect the unwinding delay would be the least of anyone’s problems. Similar thoughts about HSBC.
…Of course, this is not a guarantee they will never ever increase their fees, but it means that if you switch to them because they are currently cheapest for you, you shouldn’t find yourself being forced to jump ship before you have had chance to benefit from the savings.
They should clean up with any investors with portfolios that are of a reasonable size. I can’t see anything competitive being offered by the late-declarers, such as BestInvest and Fidelity FundsNetwork.
The more people who do switch to them, the more viable in the long term their unique fee model will be…
@ivanopinion – Yes. I do hope this means they won’t change their charges for at least 5 years although you can never really tell. I’ve been with them since 2010 & I started investing. Websites I’ve read recently were curious of how II could maintain it’s pricing but I guess their client base is mainly active & very active investors or even day traders. Seems to be what their community is all about. Guess they effectively subsidise us so can’t complain!
I manage 4 pots of money for myself & family; I’ve have had to do a little bit of juggling due the price changes:
2 ISAs through II (family linked to save £80):
Mine c.£32k – Used as a pot of money for the future. It’s indefinite, it could be used for a mortgage deposit or for kids’ education not sure. Because of this I’ve stuck loosely to keeping my age in bonds. Have 50% in Vanguard LifeStrategy 80% Equity, the rest split between the ETFs Vanguard All-World FTSE & iShares global corporate bonds to give a 70-30ish Equity-Bond split overall. Like to think it’s pretty well diversified & simple.
Family member’s c.£50k – Will be used to generate an income of hopefully around 3% a year. Have split into ETFs: 50% Vanguard All-World high yield equity ETF, 25% iShares 1-5 corp bonds, 15% corp bonds, 10% Vanguard UK gov bonds. Hopefully won’t have do much trading and pay income from the dividends.
I’m concious of going over the FSCS £50k compensation limit so not likely to put anymore with II. Will look to a new a broker, possibly Charles Stanley Direct soon.
Family member’s SIPP c.£200k with YouInvest. They’re retiring in 5 years so lower risk. Had £100k in Vanguard Lifestrategy 20% equity switching into ETFs due to the charges. Overall aiming for 20% all-world equity, 40% iShares 1-5 year corp bonds, 10% Pimco short maturity, 30% Vanguard UK Gov bonds. Will reduce the equity element down to 10% in a couple of years and putting it evenly between Pimco & 1-5 corp bonds.
My SIPP c.£13k with Hargreaves Lansdown. Retiring in 40 years maybe?! Currently have it in just the Vanguard LS 60% Equity (not sure why I choose that). From March 1st will switch it all into vanguard all-world etf.
A variety of goals with each of the 4 pots, hopefully I’ve allocated them rationally!
Early hints of a new offer for those moving to ATS.
‘ATS to offer clients £150 to re-reg onto platform’
http://www.moneymarketing.co.uk/news-and-analysis/wraps-and-platforms/ats-offers-clients-150-to-re-reg-onto-platform/2005402.article
@Snowman
Annoyingly I can see that the first year of increased charges that ATS stung me with on new years eve is being used to fund a subsidy to help them get a new customer
Nice
I think Patrick Mill the head of ATS might be getting a letter in green ink
ATS offer now up on their website
http://www.alliancetrustsavings.co.uk/cashback/?ds_medium=cpc&gclid=CLui1MPGh7wCFdOWtAod3nQABw
@ivanopinion – what makes you think BestInvest won’t be competitive? Have you heard anything about their intentions? If they stick with their fixed platform fees as they are now, they’d be a good option for many IMO.
@Snowman — ATS offer for ISA and dealing accounts but not SIPPs… Sigh.
Having chewed it over for a few days, I feel the need to do something about a few tracker funds where the costs have changed from (very little % + £24 p.a.) to (very little % + 0.45%). Moving these funds to equivalent ETFs is an obvious solution.
Except … if HL can introduce a separate charge cap on Investment Trusts because “investors tend to hold them and treat them like funds”, then perhaps I should assume they will soon introduce separate charge caps on ETFs (& VCTs).
@TCA
I meant competitive with II. BI’s overall strategy to date seems, to me, to have been more like the HL model: fairly high fees; heavy/glossy marketing. They have had limited areas where they are good value (such as no custody fee on HSBC trackers). But they now need a new model that cuts across their whole business, not just isolated exceptions, so I guess they will be trying to look competitive with HL, but won’t be willing to slash their margins by trying to compete with Interactive Investor.
@ivanopinion
Yes, I’m sure you’re right about Bestinvest’s business model.
I’m guessing it’ll be a slightly cheaper version of HL’s offering, but with simpler charging (and without the investment trust penalty!).
@Steve – I’ve been thinking it over too and have come to the conclusion I will leave HL to keep my costs down. Unfortunately I’m restricted to investing in funds and my portfolio has suddenly become more expensive without a fixed platform fee. The Vanguard passive funds I own are now almost as expensive as active funds!
In the past I had avoided the thought of paying a dealing fee for funds, but actually, with a 0.5% dilution levy for the Vanguard UK Equity Income fund for example charged by HL, it would be cheaper for lump sum investments over £2k and regular investments over £300 with a £10 or £1.50 fixed dealing fee respectively (e.g. with II who don’t charge the Vanguard dilution levy). Sounds like a plan to me.
Think I will wait a month to see what else changes and weigh up transfer costs vs only investing new money with another provider. Whatever happens, my costs are increasing.
@ivanopinion – I think I’m missing something unless you’re talking about individual fund charges, in which case I don’t know. BI charges £12.50, £15 and £30 quarterly custody fees for dealing accounts, ISAs and SIPPs respectively. These along with their dealing fees are all lower than II. It could all change of course but if, for example, they just introduced a dealing charge on funds, then I think they would be very competitive.
Perhaps I’m out of date with BI pricing.
@CisforV
Are you sure II don’t charge dilution levy? News to me.
@ivanopinion – I was surprised myself, but their Vanguard factsheet pages do state “Initial Charge / Dealing Charge 0.00% / £10”:
http://www.iii.co.uk/investing/factsheet/FPC7
“The initial charge is a fee typically payable to the fund manager to cover administrative, marketing and intermediary fees. Our pricing structure ensures that this fee is 0% for nearly all of our funds available. The dealing charge is a transaction fee charged per trade. Frequent traders may qualify for discounts on our standard dealing charge.”
I’m also not sure how flexible their regular investments (Portfolio Builder) is (or similar with other providers). Ideally I’d like to invest a set amount each month, but balance it between different funds each month, rather than doing one big annual rebalance.
@ivanopinion – Having said the above, if as it seems, II only charge £20 per quarter if you hold both a dealing account and an ISA, then that’s good value. Although I’m deliberately keeping my own between different platforms. The family linked accounts will be good for many too. Neither BI nor II beats the unbelievably cheap Halifax or even cheaper IWeb though…….
@ Cis – the Vanguard dilution levy isn’t charged by the broker it is levied by Vanguard. iii will be subject to it, although they can still claim they are not administering an initial charge. The dilution levy is not to be feared. It means you pay your own costs every time you move in and out of the fund. Non-dilution levy funds spread that cost between every investor in the fund and you get hit by an increased tracking error. Essentially, the dilution levy encourages long-term investing rather than day-trading merchants.
@ Steve – I think it would be madness for HL to announce a raft of changes and then follow up shortly after with another change. Companies want to do these things in one fell swoop not keep up a steady drip-feed of bad news.
That said, anyone hoping that their broker’s charges will stay fixed for years on end is living in la la land.
RDR is the biggest change to hit the platform industry in years. They also need to invest heavily in digital services to compete. New entrants keep wading into the market. When the situation is this fluid you can expect firms to keep adjusting their business models / pricing structure for years to come.
@Accumulator – Thanks for the reply. It’s not that I fear the dilution levy, I’ve been quite happy to pay it in the past, but it’s just another consideration. The way I see it is if I invest say for example £20k and get charged a 0.5% dilution levy, I’d receive £100 less units in the fund. Whereas since II do not advertise the dilution levy as part of the initial investment for the fund, I (maybe incorrectly) assumed they would swallow that and I’d get the full £20k invested. If that’s not the case, then surely they should make it clear a dilution levy applies (or maybe they do and I’ve missed the small print).
@Accumulator – “…dilution levy is not to be feared”. Perhaps not feared, but neither should it be ignored.
I bought a Vanguard fund with a 0.5% levy but which undercut its nearest rival’s TER by 0.1%, with the aim of breaking even after five years. But less than five years later, and thanks to the RDR, I may be forced to move from funds to ETFs, in which case I would have been better off had I bought the non-levy fund.
Or how about a non-sheltered account, where a switch between funds that track the same index keeps you invested but realizes some capital gains? Here dilution levies significantly raise the cost of using an annual CGT allowance.
@ Jumper and Cis – I can’t be sure but both your responses make me think you’ve missed my point about tracking error.
You seem to be looking at the dilution levy (or stamp duty in your case Jumper if you were investing in a UK equity fund) as a cost that’s unique to Vanguard that you add on to the OCF/TER and compare with the next nearest rival.
These costs are not unique to Vanguard they are payable on all funds, except only Vanguard are up front about them.
The accurate comparison is to compare dilution levy/stamp duty on each contrib + OCF + tracking error of Vanguard with the OCF + tracking error of Brand X.
If Vanguard are living up to their promises then Brand X should have the larger tracking error (i.e. should fall further short of the index) because they have to deduct the cost of trading (and stamp duty if UK equity fund) from their results while Vanguard don’t because they took that money from you at the door.
@Accumulator – I don’t think I’ve missed your point, but my comparisons with TERs didn’t help. Let me try a different way to put this.
£100k invested today will be worth £100k tomorrow (flat markets!) if you choose Brand X, but £99.5k if you choose Vanguard. Because of its lower tracking error the Vanguard fund will eventually make up the £500 difference and then overtake Brand X. But if events(*) mean you sell Vanguard before that happens then you would have been better off in Brand X, and part of your dilution levy becomes sunk cost.
(* Events such as the RDR making funds so horribly expensive that a shift into ETFs is more or less inevitable.)
Whilst obviously like everyone else I’m disappointed that charges are going up across the board, I see this as just another hurdle to overcome.
I like to think I’m still ahead of the game and it’s a case of two steps forward and one step back.
Having made the decision to move, the questions left are When, Where and How.
When: Well HL are introducing the new fees from 1st March but does anybody know how long it usually takes to transfer accounts?
Where: I prefer a fixed fee charge, I think it’s the fairest method, so given that ATS have guaranteed prices until 2016, I’ll probably go with them.
How: That’s the big issue for me. I could simply transfer my account and take the exit charges on the chin. But I won’t. I could sell and transfer the cash but that means being out of the market for I don’t know how long. So I propose to switch all my current holdings, mainly passive funds with a few active ones, into just a couple of funds and then transfer those across. The question I have is that I have a couple of funds that are now closed or closing to new investments, where do I stand with them if I try to transfer them?
Can someone explain why the pricing model for ETFs is different to funds? Why does HL charge 0.45% for funds but not ETFs? Is there a good reason for this, or will this change in pricing go away in the future.
“he RDR making funds so horribly expensive”: aren’t you confusing the level of expenses with their visibility?
Vanguard’s dilution levy is favourable for buy-and-hold investors. If you expect not to hold for long, then you would be better off with a different tracker, because the other investors in the fund will effectively bear the cost of the stamp duty cost that you trigger for the fund.
If you expected to hold for a long time, but then something you did not anticipate means that you decide to sell before you have recouped the dilution levy that’s unfortunate, but hardly Vanguard’s fault.
@ivanopinion – “…that’s unfortunate, but hardly Vanguard’s fault.”
Right, and I didn’t say it was. My point is just that dilution levies can be negatives as well as positives for the investor, and that circumstances may force investors to take actions they could not have anticipated. Switching from one all-share tracker to another is still long-term buy and hold; the vehicle changes but the underlying investments do not. ‘Passive’ does not necessarily mean totally comatose.
And on “the fund will effectively bear the cost of the stamp duty cost that you trigger” it isn’t that cut and dried. Redemptions can offset new purchases, so that stamp duty falls only on the net increase. Easier in a large and more liquid fund than in a smaller one.
@dearieme – The cost of holding cheap tracker funds on platforms that start to charge a percentage fee will rise considerably, since these funds have no hidden kickback to the platform. For these it’s not visibility, but a real cost rise. And its one that you (mostly) don’t have to pay if you use ETFs instead.
Currently holding Vanguard LS 60% Acc fund in HL SIPP. Given RDR and HL announcement I would like to see a post which would look at best platform(s) for passive investors whether they be using ISA or SIPP accounts with vanguard funds. Also to look at whether holding Vanguard ETF’s would now be advisable. Ideally Vanguard needs to look at launching LifeStrategy ETF’s. RDR and the platforms actions seem to be undoing all the good work of Vanguard and Monevator/Accumulator. This would be of paramount interest as individual retirement plans will take big hits because of governmental/quango regulation. Many of us rely on this site for guidance. Thank you for your ongoing insights.
William, I’ve seen the suggestion that the Alliance Trust Savings ISA is good for Vanguard, as long as your ISA is bigger than £40k – £50k.
William,
It looks like Interactive Investor at the moment for what you’re looking for (same as me by the sound of it). It looks like Bestinvest will be announcing their new RDR compliant charges in the next two weeks, so it would be worth waiting for those, just in case.
Saying that, I didn’t find their present charges easy to unscramble from their website – apparently Vanguard funds are treated as “shares” at present and you pay a £30 inc.VAT per quarter flat fee for them. Then there’s a dealing charge which is also not too clear.
@IH
II’s charges are here: http://www.iii.co.uk/shares/charges
I don’t think they charge £30 + VAT per quarter for anything, shares or funds. And I’m pretty sure they treat Vanguard funds just like any other fund.
I’m another punter with a Vanguard LS 60% HL SIPP who was slightly dismayed to find post-RDR charges increased from £24 to £500! Now thinking about an x-o SIPP with 60% in VWRL and 40% in VGOV, topping up the lagging ETF every couple of months.
Anyone have any experience of the x-o SIPP?
Pineapple,
If you sell the Vanguard LS fund and re-purchase with the two ETFs you’ll have the bid / offer spread to pay on the ETFs (which admittedly may not be much). I was therefore thinking of keeping it all with the existing Life Strategy fund and moving to a cheaper broker – one that charges a fixed fee rather than a percentage and also covers any transfer costs. II looks like a candidate and maybe Bestinvest once their new charges are announced?
After considering the pros and cons of replacing my Vanguard LifeStrategy 80% fund with ETFs available on Hargreaves platform I’ve decided that it’s not worth the hassle. To get the same exposure with automatic balancing would require 6-7 ETFs and many trades per year. I’ve now decided to move everything (ISA’s, SIPPs) over to Interactive Investor instead. Not ideal, but beggars can’t be choosers.
Where’s the cheapest place to buy gilts in an ISA?
@ NG – I don’t disagree with your decision but a rough n ready two ETF solution would be VRWL (All World ETF) and VGOV (UK nominal gilts).
I think like NG, I won’t mess about with my Vanguard LifeStrategy fund at HL, but will probably transfer it over to Interactive Investor. Does anyone have experience of their service? Their website looks OK, but it would be good to hear of anyone’s experience of them first hand.
I am not entirely sure the hassle and risk of moving, is necessarily worth saving for me. It all aprt of the fund trying to do that calculation.
I moved an ISA from HL and II to TD this time last year and must say that anyone considering moving any accounts really think carefully, my experience wasn’t great, as transferring to cash lost me so much time out the market while brokers sorted themselves out. this at a time when the market blasted off. Trying to save o.1% here or there I’m not sure is worth it IMHO. I don’t like HL’s new pricing for my passive funds but their service has been good and I cant say that II or TD have or were as goods at all. HL’s system is also in my little experience very good. One small consideration is that you cant regularly invest less then £200 in any Vanguard fund at TD. I think others might have had similar problems at Charles Stanley – but not sure. Anyway not saying to stay or go, but don’t rush into anything. Finally I guess many people might be thinking that brokers will start charging a % for ETF’s soon as well, and ETF’s have a few others costs, funds might not (Bid Spread, selling fees etc). Be careful.
Lets hope that the next thing after RDR is forcing brokers to allow free transfers and do it in less than 8 weeks. Maybe in 5 years?
@ Geo
Thanks for that. I’ve been agonising about moving away from HL but have the same reservations. Even a quick look at the Charles Stanley and Interactive Investor websites didn’t leave me very impressed.
The problem I can see with future transfers, though, is that every broker is now busy negotiating special ‘exclusive’ versions of the main tracker funds which effectively means you’ll be forced to transfer cash if you wait even a few months from now. I already have this problem with the HL-exclusive SWIP FTSE tracker, and even their HSBC FTSE 200 tracker looks different to the one I can find on other platforms.
I hope my investments will grow over time, and of course the HL fees get less competitive the bigger your pot gets as they’ll keeping taking their 0.45% until you hit £250,000 in a single account (which you might never do if you split investments between ISA, Vantage, SIPP, partner, children, etc).
So that makes me want to take action now to avoid paying, say, 4.5% of my wealth directly to HL over the next 10 years. But on the other hand who knows how the marketplace will look in 10 years time…
It’s a real conundrum and I wonder if a good hybrid solution would be to do a part-transfer out so that my portfolio is split into two or more parts:
1. A big slug of my main passive funds in the cheapest fixed price place I can find – e.g a couple of big Vanguard holdings in Alliance Trust or Interactive Investor.
2. My HL account used for smaller holdings and more frequent trading, including rebalancing. Their 0.45% with zero trading fees is quite competitive for this (although as the Accumulator pointed out Charles Stanley would be cheaper).
With this strategy you’re attacking fees using a kind of 80:20 principle without going the full 100% and losing the benefit of the superior HL service entirely. (It’s also probably not too clever to keep 100% of your investments on one platform anyway, as has been discussed before).
Here’s a piece on transferring ISAs: http://monevator.com/how-to-transfer-a-stocks-and-shares-isa/
I doubt the exclusivity issue will become a big one for most passive investors. Most brokers don’t have the clout to negotiate special deals like HL and I doubt you’re going to do better than a low price broker plus a low price Vanguard or BlackRock fund. Certainly the early announcements from HL aren’t impressive in that regard. It’s important to recognise these deals for what they are: headline grabbers that are designed to make it harder to move once you’ve been hooked.
HL’s service is reputedly good but then you pay a premium for it. I’ve used 4 of the most competitive brokers out there (none of which are HL) and don’t have any complaints. Of course, you can always find horror stories out, but really, a passive investor’s needs are pretty simple.
Exit fees are completely anti-competitive, and without regulation on this issue RDR is not going to result in downward price pressure and greater consumer choice. If anyone has spare energy I think it would be great to direct it towards lobbying the regulators on this issue. Or maybe even a blog post on this would highlight the good guys and the bad guys and help get this issue further up the agenda 😉
Pragmatically, to those who are transferring, why not approach the broker you want to transfer to and request a rebate on the costs? Its in their interests after all…
I agree that transfer can be painful – I’ve done it three times with an ISA, one was handled badly and the other two ok.
One thing I will say is that no one seems to have a bad word to say about HL service. I am even considering opening a new account (ETF only) with them. Still want a place for funds though – I guess second on my wishlist (after the abolition of exit fees) would be to encourage the brokers who are still cost effective for funds to provide better access to Vanguard.
Apologies if I’ve made these points already – 150 comments in and I have probably started to repeat myself…
@dearieme – you’re looking for somewhere with no ISA account fee and low dealing costs – and you need to check you can buy gilts for the online dealing price (regardless of whether its possible to place the order online – with ATS you have to phone the order but are charged the online price). I’d check directly with a shortlist of brokers -from the monevator table, iWeb, Youinvest and Charles Stanley might be worth investigating. No personal experience of buying gilts through any of them.
@vanguardfan – Unfortunately some companies like II charge a transfer IN fee (for SIPP), so I don’t expect they would agree to take on another providers exit fee 🙂 If only…
I’m currently with HL and must say I have been impressed with their site/app and phone support, along with the very useful information available from them. It is rather annoying for them to have gone from being a rather cost effective place to hold low cost passive funds with a fixed platform fee, to one of the most expensive (for holdings over a certain value).
I’ve been on the phone to II so I can learn more about what they offer and I’m weighing up a full transfer vs redirecting new investments. Think I’ll still wait a few months for everything to settle down.
More on II service here:
http://forums.moneysavingexpert.com/showthread.php?t=4841998
@ivanopinion thanks for useful link – I am also actively considering II
@CisforV – one annoying thing about II is that there isn’t an email address for enquiries – I have sent off two queries on their online form – they claim a response rate of 24 hours but no response to mine yet after >2 days. And I remember now that I previously tried to open an account with them and couldn’t make my email address work – never got a response from them. hmm. I don’t really have another good option for funds (iWeb have even fewer Vanguard choices).
interesting to note the issues that ii charges caused when 1st introduced,
http://simple-living-in-suffolk.co.uk/2012/06/interactive-investor-exorbitant-charges/
http://monevator.com/interactive-investor-fee-hike-rdr/
and now those same charges look very attractive
I wonder if the comments on the companys quality were ‘overspill’ in reaction to unwanted change or whether they still hold despite them now being a ‘best-buy’ rather than an ‘avoid’ for passive investors with > £30k ish
I’m with HL and realistically will have to move, prob either to ii or AT as my additional costs due to the 0.45% will be a *huge* hit which can’t justify any level of good customer service. I do rate customer service though and this is steering my thinking to go mid-table rather than cheapest perhaps but it is a notoriously difficult metric to quantify
I may leave my SIPP with HL though as it is relatively small and as such does not look too expensive yet
Ha ha. You’re quite right Rhino, it’s all relative and who doesn’t like a good vent at the world every now and then?
There’s something to watch out for if you are doing a DIY switch to clean funds (ie, selling dirty and buying clean). There are a handfull of clean funds that charge an initial charge, such as Aberdeen Emerging Markets and several First State funds. You need to get the platform to do the conversion for you, otherwise you might lose 2% or 4% just for switching to clean.
Not too many options if I want a reasonable selection of Vanguard funds together with Unicorn Income and Ruffer Total Return on one platform!
I don’t like the notion of platform charges driving my selection of investment vehicles and as an old geezer I try (unsuccessfully) to keep life simple.
To retain my existing investment vehicles within ISAs (apart from switching to clean classes where possible) it looks like the cheapest option would to be stay with Bestinvest for Unicorn Income and Ruffer Total Return and use Alliance Trust for everything else to benefit from the latter’s flat rate charge.
Then you have to worry about transfer charges and whether to temporarily merge all funds to be transferred into say a Vanguard Life Strategy fund, transfer and demerge on completion of the transfer.
I’ll obviously wait for Bestinvest to announce their charges and the dust to settle before making any decision.
I’m not prepared to do too much faffing about to try to shave .1% off annual costs especially when I may incur transfer costs and/or suffer losses resulting from the merging and demerging of funds alluded to earlier. Life is too short!
I feel I have to update after my negative post about interactive investor’s non response to my queries. They have now replied and the answers to my queries are all positive – yes they can deal in the income units of the vanguard funds I am interested in; no they don’t make a charge for converting foreign dividends eg VWRL (not sure I quite believe that) and the regular investment scheme is flexible like Youinvest (any funds can be used to buy using the scheme) and not like ATS (only funds credited via monthly direct debit can be used to make cheap purchases).
So, a decision nears…
For anyone who’s thinking about moving to ATS I have actually been using their service for nearly 20 years (back then it was just a savings service for a few Scottish investment trusts) and I can say its 3/4 stars out of 5
Of course if your family all have investment accounts, ISAs and SIPPS interactive investor is way cheaper
However you need to consider the difference in the financial strength of the two outfits:
– ATS is the subsidiary of a huge unlevered investment trust Alliance Trust
– interactive investor is a scrappy little company backed by a venture capital fund, MMC Ventures
I think, I haven’t really looked, YouInvest is kind of inbetween in terms of fees and financial strength being cheaper than ATS and half owned by InvescoPerpetual and the eponymous Mr Bell
@BeatTheSeasons
Don’t forget that you can buy from Vanguard direct, if your holding is £100k or more. No fees at all, so might be a good variation on your 80:20 approach.
£100k is a lot, but if you have £100k in a variety of regional trackers, it might be worth consolidating into a single Lifestyle tracker which would have a similar breakdown of regions. If you prefer a different weighting than the Lifestyle, you could buy extra regional trackers, but your core holding would be fee-free.
Unfortunately, they don’t offer ISAs. Vanguard, there’s an opportunity going begging here!
See my comment no. 75 – No SIPPs either – a huge shame!
@Neverland,
Rather eerie reading your comment since I was looking at the background and ownership of various brokers and decided that ATS looked much more “substantial”.
@BeatTheSeasons,
I’ve reached the same conclusion re your ’80/20′ approach. I’m currently with Bestinvest and if they hike their charges too much then I’ll reluctantly move.
Hi All,
Currently assessing my options after HL released their new charges last week. I took the decision a while back about transitioning my active funds to a passive tracker portfolio. I’m now considering the best way to do it and the increase in HL costs seems to be the opportune moment.
I have both an ISA & a SIPP with HL both currently invested in various active funds, ISA is £22K & SIPP is £25k with £500 monthly contributions.
I intend to leave the SIPP at HL for now as at the level it’s at transferring to an alternative provider would not be that beneficial, I will look to consolidate all of these funds into either Vanguard Lifestratgy fund or equivalent portfolio of trackers. I’m considering ETF’s but I think at my level of contributions the monthly investing dealing costs will become punitive. I’ve had a brief look on HL but couldn’t find anything in relation to ETF purchase costs under their regular investment plan, are these reduced or are they the same as their standard price of £12.95 per trade?
Within my ISA I’m looking to roll-up my active funds into the Vanguard Lifestrategy 100% fund and switch it across to my Fool S&S ISA incurring pretty minimal fees on th HL side. I have a bit of cash in the account so will buy the VLS and sell funds of the same value at the same valuation points so I am not out of the market at any point. There is a 0.23% dilution levy on the purchases of the VLS fund so I’ll lose a little bit here.
Fees on the Fool S&S ISA are £12.50 +VAT per 6 months, free to purchase funds normaly and via reg investment (from what I can tell) and £2.00 regular investment in ETF’s, so pretty low cost for now. Once I’ve got the VLS fund transfered across from HL I may then look to split it into a range of trackers in the future, alternitively I’ll invest new money in these trackers and leave the VLS 100% as it is which is probabably the better option cost wise.
Does anyone see any holes in this less than cunning plan?!
Interactive is now offering £120 cash and £120 dealing credits:
http://www.iii.co.uk/straightforward?icn=straightforward_jan2014&ici=heropanel
And they are putting in the boot:
“Many investors may be surprised to find that a service they had previously thought of as free, was actually being paid for by a percentage of the annual management charge being given back to the provider, without their knowledge. They may be equally unhappy with the idea that a new percentage-based fee, alongside possible other charges, is being introduced. Percentage-based charging is prevalent throughout the industry, with only a small number of providers, including Interactive Investor, keen to move away from this patently unfair pricing model to a fixed-fee proposition.”
@Neverland
“However you need to consider the difference in the financial strength of the two outfits:
– ATS is the subsidiary of a huge unlevered investment trust Alliance Trust
– interactive investor is a scrappy little company backed by a venture capital fund, MMC Ventures”
True, but does being owned by a big company really make ATS safer? ATS is a limited company, so Alliance have no obligation to prop it up.
And what is the risk? Even if II go bust, customers would still own the investments they bought. If II get into trouble they would end up selling the business to another platform, so at worst you would have the hassle of moving to another platform. II is just a relabelled version of Cofunds, so the underlying systems should be pretty robust.
My research is based on moving ISA £18k and SIPP £100k both mainly in Vanguard LS away from HL. I’m taking one deal per month into account in the SIPP. So far II comes out on top, then ATS then Youinvest. Bestinvest is an unknown entity as new prices are about to be announced. TD seem even more expensive than HL!
I guess if you want a strong parent, iWeb look good, being owned by Halifax, ie, Lloyds. And they are even cheaper than Interactive Investor. (In fact, they make II look reassuringly expensive!)
IvanOpinion – It’s a shame iWeb don’t have more Vanguard funds. Thanks for posting the II cash credit link though, I’ll have a proper read of that.
Also, I posted earlier that II don’t list the dilution levy on their Vanguard fund factsheets. II confirmed that the dilution levy does indeed apply as others on here had pointed out, they just don’t advertise it under the initial cost (or anywhere else I could find).
II charge £144 (fund charge >50k) + £18 (for 12 deals) = £162
iWeb charge £150 + £60 = £210 on the same basis
Not a lot in it, but II still cheaper – although as you say it’s not as big a company. As Ivanopinion states, you would still have the funds with Vanguard or whoever.
@ABC1
Your figures are for a SIPP and investment with II using regular investment, right?
For an ISA, II would be £80 (assuming deals covered by trading credit) and iWeb seems to be £60 (only cost is dealing).
IWeb has a quarterly admin charge of £37.50 and fund dealing will be going up from free to £5 as from 31 March 2014 so I based that on 12 deals a year. There is more info on charges there which I have not had time to read up on yet, so I may be missing something which alters my figures drastically
Fidelity’s new pricing is interesting (not fess at all apart from 0.35% – thats right no fees for anything else even transfers away), although their fund selection lacking at the moment. Also interesting write-up / comparisons on this blog http://langcatfinancial.co.uk/blog/
Does anyone know if iWeb offer the full range of Vanguard funds? The only one I have is Life Strategy 60%
IWeb has a quarterly admin charge of £37.50, yes, but only for a SIPP.
They currently have only a couple of Vanguard, but once they have switched to clean funds only, I would see no reason why they would not add all the Vanguard.
@ivanopinion
iweb looks a pretty good compromise between ATS and iii, after all Lloyds really does enjoy a government guarantee
Thanks for the tip I will check this out
I use the Vanguard etfs so this might suit me very well
Bestinvest are going to charge .40%. Looks like a decision to undercut H-L b y the smallest amount possible!
Bestinvest proved to be a damp squib – it looks like all to Youinvest or keep Youinvest and send the Vanguard LS to III
The news from Halifax Stockbrokers looks good for us passive investors with larger portfolios. The charge seems to be a fixed £12.50 per year for an ISA. They may have a very limited range of Vanguard Funds, but there is a whole load of other tracker funds from Blackrock, HSBC and Legal and General, covering every asset class, with miniscule AMCs.
Their full list of funds, including when they are being converted to to clean class can be found on their website, here:
https://www.halifax.co.uk/sharedealing/pdf/fund-conversions.pdf
Not sure why anyone would stick with HL and pay 0.45%, when you can go to Halifax and pay £12.50 per year, unless you were trading a lot and incurring their trading fee (which is £12.50 per trade for funds). For me this looks ideal, but I think would appeal to people with active funds too.
“Hargreaves Lansdown has scrapped the extra charge it was set to impose on investors putting money into both investment trusts and shares on its DIY platform following anger from users.”
Read more:
http://www.thisismoney.co.uk/money/diyinvesting/article-2552109/Hargreaves-Lansdown-scraps-extra-investment-trust-charge.html
Interesting. I wonder if enough angry passive investors complain HL will drop their percentage fee back to a fixed £2 platform fee per fund? Probably not!
I still haven’t made the jump away, but I will be opening a “free research account” with II to play around with and see what they’re like.
A few points from the above posts
the ii quarterly charge is £20+VAT, not £20
the ii £1.50 regular dealing charge does not look look like it can be used to purchase funds, fund purchases will cost £10 a go
these details may be of interest to some potential switchers
ignore above comment – i got it wrong – latest on the broker price comparison thread has more accurate info
Peter – Halifax have extended their range of Vanguard funds and now include all of the Life strategy funds amongst others. A phone call to them also confirmed that funds can be bought for £2 per trade using their regular trading scheme. I notice they also have the Blackrock D series trackers. I was thinking of moving to Charles Stanley but this may have swung it for me to stay.
I have spoken to Interactive Investor twice and on both occasions they confirmed that you CAN purchase Vanguard Life Strategy (and all other funds) on their regular monthly investment set-up for £1.50 a go.
@ the Rhino – You had me worried there as I’ve switched from H-L to them this week. They seem very helpful so far – early days though…
PS – You can’t buy bonds on II’s regular investment set-up
@ABC1 would be very interested to hear how your switch goes as i am considering a similar move myself, not totally convinced with ii under ‘its too good to be true’ but would like to be proven wrong on that. I did notice a lot of complaints about their website on their own community forum. Another confusion thrown into the mix is that HL are now offering reduced rates and caps to customers through their retention dept – some reports are 0.2% capped to 1st £250k which is a massive saving on their advertised rates
also HL are waiving their exit fees if you ask firmly
@ Rhino
Those two comments could be the most useful on this thread!!!
I wonder if you have to actually complete the transfer forms before they offer the retention? It does make perfect sense as I’ve had the same thing with phone contracts, insurance and so on.
I have advised H-L through their secure messages that I am leaving because of their high charges and that I would like the exit fees waived. I didn’t even know they had a ‘retention department’ – might have been useful and made the move not quite so compelling.
Didn’t anyone at H-L see what effect their new charges would have on ‘higher value’ passive portfolios??
In any case, I have not had a reply from H-L as yet – but will keep you posted on the outcome.
@ABC1 yes its tricky for HL. On the one hand they have effectively reduced their charges overall, but at the same time it has now become very clear that they are still very expensive, both for small and large portfolios.
Its difficult to see how they can win so to speak.
I guess they are still not too bad for shares and the like due to their reasonable caps – but for funds I don’t see how they can appeal to anyone. Large portfolios have a few fixed fee/free options that will deliver big savings and small portfolios can pay approx half the % fee.
Customer apathy and company reputation will have to be very strong for HL going forward
H-L have now responded to my complaint with an offer to cap charges on Vanguard LifeStrategy funds held in a SIPP to £250. My lazy side finds this tempting, but they reserve the right to change terms on a whim and I still have an uneasy feeling about it. A pity they didn’t offer such terms from the start.
Still waiting to hear from H-L….
I have to say the news that HL are prepared to reduce fees for those who complain leaves a nasty taste in the mouth. Seems like their advertised fees are Mugs Charges…
I received a survey from HL last week.
Normally I’d delete it, but this time took the time to inform them of my dissatisfaction. I’d suggest others who get the survey do the same.
If everyone negatively affected responds, it may just persuade them to improve things somehow. They’ve already done a u-turn on the separate investment trust charges.
H-L got in touch today and offered 0.25% on funds. They didn’t say whether they would waive exit fees as I said I’d think about whether to continue with the switch. I’ll be saving £110 to £120 a year if I switch – every year, and that’s after allowing for 24 deals a year on II’s regular investment purchases. It’s not a fortune so I’m thinking overnight on it and deciding whether to continue with it tomorrow.
I got the opposite response today. That they’d waive the exit fees, but wouldn’t reduce the fund charges 🙁
I’ve written a letter of complaint to HL re: exit fees after having no joy over email and phone. I’m also transferring out my ISA and fund account to iWeb. leaving the HL SIPP though as that still looks cheap and the exit fee will actually reduce in the future for my setup.
I’ve been thinking of these new HL fees in terms of a percentage of what I pay into my SIPP each year.
I have £175k in my SIPP in two funds, which attract £36 worth of platform fees currently.
From next month I’ll be charged 0.45% which will cost me £788.
I pay £12k a year into my SIPP (gross) so the new fees will equate to a 6.6% charge on my inputs.
This really puts into perspective the scale of the new uncapped platform fees that HL have chosen to enforce.
I’m more than happy to pay for the excellent service, but an increase in my personal fees of 2185% is rather a large jump.
NB. I appreciate that some of the TER’s may get reduced, making the jump in overall charges a little less.
Ian, that’s a painful leap, no mistake. However I don’t see the logic of setting the fee against your new money? If you had only £12k you wouldn’t be paying £700+. Or alternatively by the same logic you’re paying 6.6% on new money but running your £175k free.
I appreciate it’s a thought exercise, but can’t help feeling you’re trying to feel as bad as possible!
Just my two pence, obviously I hope you find a solution that works for you.