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    • ozaz
    • By ozaz 18th Mar 17, 12:52 PM
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    ozaz
    Stocks & Shares ISA Fee payment options
    • #1
    • 18th Mar 17, 12:52 PM
    Stocks & Shares ISA Fee payment options 18th Mar 17 at 12:52 PM
    I invest via Hargreaves Lansdown and all my investments are held in a stocks and shares ISA. There are multiple options for fee collection. The default option is to collect fees from income and capital held within the ISA (standard option - see below). Not previously realising there are multiple options, my account is set to this option.

    There is also an option to prioritise fee payment from a cash balance maintained outside the ISA (Fund and Share account option). My inclination is to switch to this option as it seems to me better to avoid using tax-sheltered money on fees. But would appreciate any comments.

    Thanks

    ---

    Explanation of options - copied and pasted from HL website


    The standard option - The most popular

    We will try to collect fees in this order:

    - Loyalty Bonus Account (note that Loyalty Bonus is now paid directly to the account in which the units are held)
    - The income account of the selected account (e.g. Stocks & Shares ISA)
    - The capital account of the selected account (e.g. Stocks & Shares ISA)
    - Cash in your Fund & Share Account based on the collection option you have chosen for that account (unless the selected account is the Fund & Share Account)

    Collecting fees from the income account in preference to money held in the capital account (which is generally held pending reinvestment) is the preferred option for most clients.

    The income option - For clients who would like more income

    We will try to collect fees in this order:

    - Loyalty Bonus Account (note that Loyalty Bonus is now paid directly to the account in which the units are held)
    - The capital account of the selected account (e.g. Stocks & Shares ISA)
    - The income account of the selected account (e.g. Stocks & Shares ISA)
    - Cash in your Fund & Share Account based on the collection option you have chosen for that account (unless the selected account is the Fund & Share Account)

    Collecting fees from the capital account first means more income is available to be paid out or reinvested.

    The high income option - For clients who would like maximum income

    We will try to collect fees in this order:

    - The Loyalty Bonus Account
    - The capital account of the selected account (e.g. Stocks & Shares ISA)
    - Cash in your Fund & Share Account based on the collection option you have chosen for that account (unless the selected account is the Fund & Share Account)

    Collecting fees from the capital account only means that none of the income you receive goes towards fees.

    The Fund & Share Account option - For clients who would like to pay their fees outside their ISA/SIPP, where possible

    We will try to collect fees in this order:

    - The Loyalty Bonus Account
    - Cash you hold in your Fund & Share Account based on the collection method you have chosen for that account
    - The income account of the selected account (e.g. Stocks & Shares ISA)
    - The capital account of the selected account (e.g. Stocks & Shares ISA)

    Collecting fees from the loyalty bonus account and Fund & Share Account first helps protect the value of your ISA/SIPP
    Last edited by ozaz; 18-03-2017 at 12:55 PM.
Page 1
    • AnotherJoe
    • By AnotherJoe 18th Mar 17, 1:48 PM
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    AnotherJoe
    • #2
    • 18th Mar 17, 1:48 PM
    • #2
    • 18th Mar 17, 1:48 PM
    I take your point but unless you are running it incredibly close to the bone in terms of being fully invested, does it really make any practical difference?
    Also, yes you'd be taking out say £20 of 'tax sheltered' money, but you arent getting any interest on that, so in what respect is it any different to £20 in your ordinary share dealing account?

    You might also take the view that taking the fees out of the ISA gives you a true picture of what your returns are.
    • ozaz
    • By ozaz 18th Mar 17, 2:37 PM
    • 50 Posts
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    ozaz
    • #3
    • 18th Mar 17, 2:37 PM
    • #3
    • 18th Mar 17, 2:37 PM
    I take your point but unless you are running it incredibly close to the bone in terms of being fully invested, does it really make any practical difference?
    Also, yes you'd be taking out say £20 of 'tax sheltered' money, but you arent getting any interest on that, so in what respect is it any different to £20 in your ordinary share dealing account?

    You might also take the view that taking the fees out of the ISA gives you a true picture of what your returns are.
    Originally posted by AnotherJoe
    My main thinking was that if none of the income is going on fees then it will all get automatically reinvested. In a sense this boosts my ISA contributions in a year.

    But I might have been misunderstanding what these fee payment options relate to. I had been thinking they relate to both platform fees and individual fund fees. Looking more closely it now looks like they relate to platform fees only. For me this is about £80/year at the moment so perhaps not worth worrying about.

    So, to correct my understanding. Are individual fund fees are taken from the amount invested in the fund itself?
    • ColdIron
    • By ColdIron 18th Mar 17, 3:02 PM
    • 3,163 Posts
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    ColdIron
    • #4
    • 18th Mar 17, 3:02 PM
    • #4
    • 18th Mar 17, 3:02 PM
    The options only relate to the platform fee, the fund manager charge is deducted by the fund manager. If you already have a Fund and Share account it makes sense to keep as much in the ISA as you can but it will depend on the sums involved. If you don't already have one then bear in mind there is a £25 + VAT charge to close it that will need to be paid at some point
    • ozaz
    • By ozaz 18th Mar 17, 5:58 PM
    • 50 Posts
    • 12 Thanks
    ozaz
    • #5
    • 18th Mar 17, 5:58 PM
    • #5
    • 18th Mar 17, 5:58 PM
    Thanks.

    Is there a way to find out how much fund managers are actually deducting on specific funds?

    I know the Key Investor Document provides a net ongoing charge figure but I also understand that this is only an estimate and does not include costs related to share transactions.

    Also, do I have any choice on how individual-fund fees are paid? I assume they are just automatically pulled from the money I have invested in the fund?
    • AnotherJoe
    • By AnotherJoe 18th Mar 17, 6:18 PM
    • 6,567 Posts
    • 7,003 Thanks
    AnotherJoe
    • #6
    • 18th Mar 17, 6:18 PM
    • #6
    • 18th Mar 17, 6:18 PM

    So, to correct my understanding. Are individual fund fees are taken from the amount invested in the fund itself?
    Originally posted by ozaz
    Absolutely, its inherent in the pricing of the fund and you'll never see that as a separate charge. With some mangled maths as an example, lets say your fund would have risen to £110 from £100. But before pricing that the manager deducts his (say) 0.25% charge so your fund price will show as £109.75. You'll never see the £110.

    Thanks.

    Is there a way to find out how much fund managers are actually deducting on specific funds?

    Yes its in the main description page for that fund on HL

    Also, do I have any choice on how individual-fund fees are paid? I assume they are just automatically pulled from the money I have invested in the fund?
    Originally posted by ozaz
    No. Correct, as said its just inherent in the price of the fund. They arent really pulled from your money specifically, the fund price includes deductions made for fees.

    Its not much different to buying a loaf of bread at Sainsburys. Say the loaf is £1. A typical supermarket margin might be 5%, so it cost them 95p and they sell it for a Pound. But they dont charge you 95p plus an itemised 5p charge for bread margin at the checkout.
    Last edited by AnotherJoe; 18-03-2017 at 6:28 PM.
    • ColdIron
    • By ColdIron 18th Mar 17, 6:27 PM
    • 3,163 Posts
    • 3,602 Thanks
    ColdIron
    • #7
    • 18th Mar 17, 6:27 PM
    • #7
    • 18th Mar 17, 6:27 PM
    Thanks.

    Is there a way to find out how much fund managers are actually deducting on specific funds?

    I know the Key Investor Document provides a net ongoing charge figure but I also understand that this is only an estimate and does not include costs related to share transactions.
    Originally posted by ozaz
    If you mean actual pounds an pence I've never tried. I'd imagine the annual reports would be a good place to start

    Also, do I have any choice on how individual-fund fees are paid? I assume they are just automatically pulled from the money I have invested in the fund?
    If you mean the platform fee for an individual fund then no, the options apply at the account level

    If you mean the fund manager charge then that's pretty much a no as well but it can be useful to note whether the charges are deducted from capital or income. If you have the Acc fund or have the dividends reinvested in the Inc fund it makes little difference but if you are taking the income to pay the bills from the Inc fund it will determine the level of income and growth
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