Dealing commission on funds

Derivative

Is dealing commission charged on funds in the same way as stock?
For example, The Share Centre's £7.50 or 1% dealing commission. Does that apply only to stock purchases or also funds?

I am looking into a way to use my ISA allowance this year before the deadline.

soulsaver

No. I don't know about Share Centre's charges. but if you buy from a discounter like Hargreaves Lansdowne initial charges are discounted to nil and a slice of the funds annual trail commision normally paid to intermediaries are rebated by HL to you.
Switching funds is free too. There may however be an ISA exit charge if you decide to transfer & HL are not cheap for share dealing which makes it expensive if you wanted to switch to shares from funds.

Derivative

How about sales commission?
Do HL make their cut from the fund fees themselves then?

If we take the HSBC FTSE250 acc as an example, the TER is only 0.27%.
Am I right in saying if the 250 + dividends would have returned 5% in a year, I'll see roughly 4.7% yield?

My main concern is that investing in shares requires a large outlay to make up the commissions. With The Share Centre's £7.50 minimum, that meant anything less than £750 in a company was a 2.5% loss straight away. I want to use my Cash ISA allowance and then put the rest into funds (1-2k)

soulsaver

EdgEy wrote: »

How about sales commission?
Do HL make their cut from the fund fees themselves then?

If we take the HSBC FTSE250 acc as an example, the TER is only 0.27%.
Am I right in saying if the 250 + dividends would have returned 5% in a year, I'll see roughly 4.7% yield?

My main concern is that investing in shares requires a large outlay to make up the commissions. With The Share Centre's £7.50 minimum, that meant anything less than £750 in a company was a 2.5% loss straight away. I want to use my Cash ISA allowance and then put the rest into funds (1-2k)

HL make their 'end' from the trail commission they split with you.
HSBC 250 is a bit of an anomally. As you point out, the low ter on the HSBC 250 acc doesn't fund trail commission; so you may find there's a admin charge of 0.5% pa (max £200) for holding this one in an HL ISA. It also doesn't pay a divi out which is what 'acc' means - accumulation - so their is no yield. It is in effect a tracker, hence the low ter.
If you meant if the 250 performance was + 5% then you are vaguely correct with your conclusion, but there is likely to be a (usually small) degree of tracking error also to take into account.

psychic_teabag

For some reason, H-L don't seem to currently charge the extra 0.5% for the HSBC trackers, despite the low AMC. But they do for some low-charge funds such as the fidelity moneybuilder.

There are "portfoliobuilder" accounts from iii, halifax and motley fool which allow share purchases on fixed days for a flat £1.50 (though it's then around £10 to buy on other days, and to sell). I believe all three actually use the same underlying service from Halifax, but iii is the cheapest access route. I think Alliance Trust now also offers a £1.50 portfolio-building service.

dunstonh

For some reason, H-L don't seem to currently charge the extra 0.5% for the HSBC trackers, despite the low AMC. But they do for some low-charge funds such as the fidelity moneybuilder.

HL use the HSBC funds as a loss leader to entice people in. It allows them to make claims of "low cost" in their marketing. Quite a few "bundled" platforms include a limited range of index trackers for much the same reason.

In reality, no-one is likely to go 100% into one HSBC fund if they know what they are doing. So, they can make money from the other funds that are used.

Derivative

So on HL, if there's no initial fee (or it's refunded), the TER is an accurate representation of my charges?

Even a single FTSE100 or 250 fund seems like a better idea to me than buying large caps individually. Not as diverse as buying tons of funds but less risky (and cheaper for a <9 year investment) than 7 companies at £1k, paying 2.5% round trip on them. I have about £7k to put down.

Any opinions? Would you say that for a 5-10 year time horizon cash ISAs will win out over a tracker?

jimjames

EdgEy wrote: »

So on HL, if there's no initial fee (or it's refunded), the TER is an accurate representation of my charges?

Yes, it is a good guide to the charges you will pay - although invisible to you as it is taken directly from the fund pricing not a charge from your account

EdgEy wrote: »

Any opinions? Would you say that for a 5-10 year time horizon cash ISAs will win out over a tracker?

No. Share based ISAs should perform better than cash over the long term.

DavidHayton

soulsaver wrote: »

HL make their 'end' from the trail commission they split with you.
HSBC 250 is a bit of an anomally. As you point out, the low ter on the HSBC 250 acc doesn't fund trail commission; so you may find there's a admin charge of 0.5% pa (max £200) for holding this one in an HL ISA. It also doesn't pay a divi out which is what 'acc' means - accumulation - so their is no yield. It is in effect a tracker, hence the low ter.
If you meant if the 250 performance was + 5% then you are vaguely correct with your conclusion, but there is likely to be a (usually small) degree of tracking error also to take into account.

The HSBC trackers are good value through HL. There is no admin charge, and I suspect that HL are making no money on them at all. I use them to follow the FTSE-100 and the S&P500. These markets are so well researched that I really can't see where an active fund manager is going to be able to add value. That said, these funds are small parts of my overall portfolio of funds and HL will certainly be making their money on the rest.

One point ... accumulation funds do technically yield an income (though it is rolled up in the fund price). If you are a higher rate tax payer you have to pay additional tax on the rolled-up income on any accumulation funds you hold outside an ISA or SIPP.

David

soulsaver

DavidHayton wrote: »

The HSBC trackers are good value through HL.
One point ... accumulation funds do technically yield an income (though it is rolled up in the fund price). If you are a higher rate tax payer you have to pay additional tax on the rolled-up income on any accumulation funds you hold outside an ISA or SIPP.

David

On your tax comment: When an acc fund is sold, do you deduct that rolled up income from any gains then for CGTax calculation?

soulsaver

soulsaver wrote: »

On your tax comment: When an acc fund is sold, do you deduct that rolled up income from any gains then for CGTax calculation?

Bump.......................:)