Questions on ISA-fund supermarkets-ITs

StinkyMonkey

Hello,

First, apologies if this post is not in the right forum - it is my first message and I am not sure if I doing this correctly.

I would appreciate some help by other users of the forum regarding a stocks&shares ISA I am looking into setting up. My understanding is that it would be less expensive to go through a fund supermarket in order to invest in unit trusts under an ISA (I am looking into a regular (monthly) investment plan).
Is this correct? If yes, would anybody be able to suggest which fund supermarket is "best"?

Finally, on a slightly different topic, assuming that I set up an ISA through a fund supermarket, would it be possible to include investment trusts within my ISA wrapper? Any views on the pros and cons of unit trusts/investment trusts would also be greatly welcome.

Many thanks in advance for taking the time to help me!

SM

dunstonh

My understanding is that it would be less expensive to go through a fund supermarket in order to invest in unit trusts under an ISA (I am looking into a regular (monthly) investment plan).

Depends on the fund supermarket or the adviser/broker that you use.

Is this correct? If yes, would anybody be able to suggest which fund supermarket is "best"?

If you are going DIY and its unit trusts then Hargreaves Lansdown. If its investment trusts then it will be different.

RayWolfe

The largest fund supermarket is run by Hargreaves Lansdown but there are many others, try googling to get the list.
There would be a charge to hold ITs in a supermarket and in others it would not be possible.
Often, the best way to hold ITs is directly through their own savings plans. Outside an ISA, there is usually no charge. Inside an ISA there would be but it would be difficult to justify these cost for a small holding of ITs in an ISA.

StinkyMonkey

dunstonh wrote: »

Depends on the fund supermarket or the adviser/broker that you use.

If you are going DIY and its unit trusts then Hargreaves Lansdown. If its investment trusts then it will be different.

Thank you for your very quick response. A few further questions...

I am not sure I fully understand how the adviser/broker affects the costs but then again, I dont know how advisors interact with fund supermarkets!
I am not sure if this question sounds appropriate but, since you are an IFA, would you be prepared to tell me which one(s) you would "recommend"? Alternatively, would you be able to indicate the pros/cons of the known ones? Sorry if I ask for too much.

On what bases H-L is your preferred option for DIY ISA investments?

Regarding ITs, I note that you wrote that things are different. Can you elaborate on this? How can ITs be included in a S&S ISA?

Thank you again for your help.

StinkyMonkey

RayWolfe wrote: »

The largest fund supermarket is run by Hargreaves Lansdown but there are many others, try googling to get the list.
There would be a charge to hold ITs in a supermarket and in others it would not be possible.
Often, the best way to hold ITs is directly through their own savings plans. Outside an ISA, there is usually no charge. Inside an ISA there would be but it would be difficult to justify these cost for a small holding of ITs in an ISA.

Thank you for your response! I do appreciate it. Do you know whether H-L's charges/discounts are as good/worse/better than the rest of f S/Ms?
Also, would a direct regular investment (say £50-100/month) in an IT make sense? I do not have a feeling of the charges involved, how they relate to typical charges for UTs and whether they make small, regular investments prohibitive.

Many thanks!

purch

How can ITs be included in a S&S ISA?

Either by using an ISA wrapper marketed by one of the Investment Trust Co's themselves, or by using an ISA wrapper marketed by a Stock Broker, or Online Broker

eg. A Self Select ISA from E Trade has a management fee of £ 2.50 per month, and allows you to hold and trade Equity's etc. Of course their dealing fees also apply, but this way you could buy and hold IT's.

As an example of IT Co's themselves, Foreign & Colonial ISA has a fee of £ 60.00 a year, and allows you to hold any of their 13 odd trusts.

On what bases H-L is your preferred option for DIY ISA investments?

You will probably find that the wrapper from H&L is most the cost effective, and offers the widest choices of Funds and Discounts.

StinkyMonkey

purch wrote: »

Either by using an ISA wrapper marketed by one of the Investment Trust Co's themselves, or by using an ISA wrapper marketed by a Stock Broker, or Online Broker

eg. A Self Select ISA from E Trade has a management fee of £ 2.50 per month, and allows you to hold and trade Equity's etc. Of course their dealing fees also apply, but this way you could buy and hold IT's.

As an example of IT Co's themselves, Foreign & Colonial ISA has a fee of £ 60.00 a year, and allows you to hold any of their 13 odd trusts.

You will probably find that the wrapper from H&L is most the cost effective, and offers the widest choices of Funds and Discounts.

Thank you! It is really nice to see so many people providing considered responses in this forum so quickly.

A few, potentially silly(!), questions...

- when referring to the H-L ISA, do you mean their Vantage ISA product? For some reason, I had the impression that it was a fairly "costly" one compared to other F S/Ms? Am I completely wrong?

- assuming that I start a regular payment S&S ISA with one of the IT companies, would the preclude me from setting up a separate one with, say, H-L in the same financial year?

Thank you for your help!

dunstonh

The largest fund supermarket is run by Hargreaves Lansdown

Its not the largest. Cofunds is the largest independent fund supermarket. Skandia is technically the largest but they tend to include their own funds in the mix which distorts figures a bit.

I am not sure if this question sounds appropriate but, since you are an IFA, would you be prepared to tell me which one(s) you would "recommend"?

I cannot make recommendations via the board. It would breach FSA and board rules. However, even if i could it wouldnt really suit what you are after as I make recommendations to suit the needs of my clients who are using an adviser. The needs of someone not using an adviser will be different.

There are pros and cons with the different fund supermarkets. Reflected as such in that I have clients in 4 different fund supermarkets depending on needs and quality of product to suit that need.

I am not sure I fully understand how the adviser/broker affects the costs but then again, I dont know how advisors interact with fund supermarkets!

Some fund supermarkets are "white labled" with a an adviser/broker name but are just front ends for Fidelity, Cofunds or Skandia (or others). If you go direct to Fidelity, for example, you pay the same, if not more, than using an adviser who uses Fidelity. If you go to Smile, they use Fidelity as their backbone but charge more than many IFAs would yet you dont get the advice.

On what bases H-L is your preferred option for DIY ISA investments?

Its not my preferred option but its the one that would suit the DIY ISA investor due to their charges.

StinkyMonkey

Thank you for this response and apologies for the misguided question. I hope I will soon learn the do's and don't of the board.

Your help is much appreciated.

RayWolfe

StinkyMonkey wrote: »

Also, would a direct regular investment (say £50-100/month) in an IT make sense? I do not have a feeling of the charges involved, how they relate to typical charges for UTs and whether they make small, regular investments prohibitive.

Small, regular investments into ITs is not only effective - particularly in this current market - but is expected and catered for in IT savings schemes. There are usually no charges to do so outside an ISA. Some will accept payments as low as £50 per month, others want £250 per month. Some will accept £250 and accept a spread over more than one trust. Those that do charge to buy, charge a small percentage so small amounts are not prohibitive.
My I suggest you go to:
http://www.trustnet.com/it/funds/perf.aspx?leftnav
and take some of the links to the IT Managers. They are very keen on savings scheme customers, hence the mainly free entry. Send off for copies of the scheme particulars and the Report & Accounts of the trusts that interest you. They will tell you about the charges, if any and the annual charges within the trusts.

I have been buying (and selling) ITs within savings schemes for 15 years and the charges for buying and selling are either minimal or non existent and the annual charges are a lot smaller than UTs.

Good luck.

cheerfulcat

StinkyMonkey wrote: »

I would appreciate some help by other users of the forum regarding a stocks&shares ISA I am looking into setting up. My understanding is that it would be less expensive to go through a fund supermarket in order to invest in unit trusts under an ISA (I am looking into a regular (monthly) investment plan).
Is this correct? If yes, would anybody be able to suggest which fund supermarket is "best"?

Hargreaves Lansdown offer good discounts and the ISA wrapper is free for those funds which pay trail commission.

Finally, on a slightly different topic, assuming that I set up an ISA through a fund supermarket, would it be possible to include investment trusts within my ISA wrapper?

You can hold ITs in a HL ISA but there is an annual charge of 0.5% + VAT, and their dealing charges are not the cheapest. I use Alliance Trust's ISA for my IT holdings. There is no annual charge for the ISA though they have a rather annoying habit of charging for things like withdrawing cash and corporate actions.

Any views on the pros and cons of unit trusts/investment trusts would also be greatly welcome.

Unit trusts are more expensive. They are also IMHO much more likely to be closet trackers. Unlike UTs, ITs can trade at a discount ( or premium ) to NAV so you can pick up an extra bit of return should the discount narrow. Another difference is the use of gearing - ITs can, UTs cannot.

Also, AFAIK there is no single unit trust which can act as a complete portfolio within one share, which is what some of the global generalist ITs do - it would be perfectly possible to hold a single IT like RIT and get exposure to all asset classes ( see here for rough idea of portfolio ). Not something I would normally advocate but handy for anyone with a very small amount to invest.