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koru

Special_Saver2 wrote: »

- iii added to post 2 because they will be rebating 100% of their commission from 1st July 2012 (but their transaction charges make them uncompetitive when compared to Cavendish Online)

But iii's bigger rebates (see my post here: http://forums.moneysavingexpert.com/showpost.php?p=53974439&postcount=749) could more than offset the one-off transaction charge for some investors (depending on size of funds portfolio, specific funds held, frequency of trading).

Special_Saver2

Hi koru,

Thanks for the useful information. I have had a look at your other post (that you linked to above) and it is interesting. Thanks for giving specific examples. I have amended my entry in post 2 of this thread and promoted iii from the "Least good deals (usually beaten by another provider above)" to the "Best Deals (in some circumstances)" category.

SS2

koru

I wonder in how many cases is ATS still going to be the best option?

For fund investors who trade reasonably often and/or have fairly small portfolios, Cavendish was, and remains, the best option, because the saving on trading fees and annual fees more than makes up for the lower rebates on Cavendish. ATS was only ever potentially the best option for fund investors who tend to have a buy and hold strategy and/or have big portfolios (on which the higher rebates can mean big savings).

In comparison with ATS, iii has higher annual fees (£80 versus £30), but lower commission on real-time trades (£10 versus £12.50) and rebates that, I would guess, for most portfolios will average perhaps 0.15% more than ATS. I would guess that for those people for whom ATS was previously the cheapest, quite a large proportion would now be better off with iii.

Even ignoring the difference in trading costs, an extra rebate of 0.15% will offset the extra £50 annual fee of iii in comparison with ATS for fund portfolios bigger than £33,000. I'm guessing that most fund portfolios of that size would be better off with Cavendish, because of the lack of fees. So, there might not be any size of portfolio that is generally going to be best with ATS any more. ATS might now only be the best option for fund investors who invest mainly in funds which pay little or no commission (such as index funds and bond funds and active funds with no commission-free fund classes) or they happen to invest in the relatively rare active funds where ATS has higher rebates, such as Aberdeen funds.

I seriously wonder if you should be switching the positions of ATS and iii in your tables. I'm probably going to stay with ATS for now, because things are changing so rapidly and there are significant switching costs, so I don't want to be switching regularly, chasing the new best deal. I'm going to wait until the dust has settled in say 1-2 years.

Special_Saver2

Hi koru,

Well, I have just tried a comparison of several funds that I am interested in using Alliance Trust, Cavendish with Fidelity Fundsnetwork, and iii. I am getting a split set of results - some of the funds have similar rebates with different providers, whilst other funds have a better rebate with one of them (each provider has a better rate than others on one or more funds). From the comparison that I have done, it all depends on which funds you choose but these three providers do seem to stand out compared to the others. It also appears to me that smaller portfolios or portfolios where there is a lot of trading would be better of with Cavendish because of the lack of annual and transaction charges, whilst larger portfolios might be better off with Alliance Trust.

I do not want to demote Alliance Trust because they seem to consistently do well for large portfolios in comparisons, e.g. see the comparison done on the Candid Money page. (I really like this page including the comparison and comments.)

I will promote iii to the top section of post 2. I will be curious to see how the Candid Money calculations work out when they update their page (at the moment, the last update of that page is from 14th March 2012, which is before iii's recent changes).

SS2

koru

Out of interest, on which fund did Cav have a bigger rebate?

Special_Saver2

Royal London Ethical Bond (in an ISA transfer or unwrapped) - 0.5% rebate with Cavendish/Fidelity compared to 0.39% with iii,

and marginally better on Kames Ethical Corporate Bond Fund - 0.5% rebate with Cavendish/Fidelity compared to 0.49% on iii.

I know these are not commonly held funds, which is why I looked at the Candid Money page, where they made a comparison using more common funds.

SS2

koru

ATS has now hiked its fees. iii is looking very attractive indeed.

More details here

koru

To be fair to ATS, I have been having a closer look at other fund houses (which I don't happen to use) and there are quite a number where ATS gives a significantly bigger rebate (at least 0.75%, versus 0.64%) than Interactive Investor (even though both platforms claim that they rebate all commissions):
Premier,
Old Mutual,
Martin Currie,
Investec,
Insight,
Henderson,
HSBC,
F&C,
Cazenove,
Barings,
AXA Framlington,
Aberdeen

For the avoidance of doubt, I am generally looking at actively managed equity funds on which the AMC is at least 1.5%.

But on all of these fund houses the rebates are significantly higher at Interactive Investor (generally 0.64% versus 0.5%):
Artemis,
Baillie Gifford,
Black Rock,
Newton,
Fidelity,
Franklin Templeton,
Ignis,
Invesco Perpetual,
JP Morgan,
Kames,
Legal & General,
Schroders,
Threadneedle
and UBS.

The platform with the biggest rebates will therefore depend on which particular funds you invest in. However, if you have multiple accounts for your family, Interactive Investor is significantly cheaper on the custody/admin fee and it also has lower dealing fees, so it will often be a better choice than ATS unless your particular portfolio is heavily biased to those funds on which ATS gives bigger rebates than iii.

jem16

koru wrote: »

there are quite a number where ATS gives a significantly bigger rebate (at least 0.75%, versus 0.64%) than Interactive Investor (even though both platforms claim that they rebate all commissions):

It doesn't sound like the full rebate is being given unless it's at least 0.75% on a typical managed fund with an amc of at least 1.5%. If that's the case they appear to be keeping some of the platform fee. Either that or they don't get as good a deal from the fund providers as some platforms do.

The platform with the biggest rebates will therefore depend on which particular funds you invest in.

I would have thought the specific fund as opposed to the fund house will make the difference.

For example I have a Kames fund which only gives a 0.5% rebate but the amc is only 1% and not 1.5%. I know you did say you were looking at funds with an amc of at least 1.5% though.

koru

jem16 wrote: »

It doesn't sound like the full rebate is being given unless it's at least 0.75% on a typical managed fund with an amc of at least 1.5%. If that's the case they appear to be keeping some of the platform fee. Either that or they don't get as good a deal from the fund providers as some platforms do.

I think it is the latter. iii explicitly say that they rebate all trail and platform commission, but they rarely seem to give more than 0.64% rebate, so they seem to be receiving less than the 0.75% commission that you would expect. ATS says it rebates all commission (though it does not specifically mention platform commission) and that would seem to be confirmed by the fact that they give rebates of 0.75% or more on many funds (my first list). However, there are plenty of funds where they only give a rebate of 0.5% (such as my second list), which means they are either getting no platform commission or they are getting trail and platform, but less than the normal 0.50 and 0.25.

jem16 wrote: »

I would have thought the specific fund as opposed to the fund house will make the difference.

For example I have a Kames fund which only gives a 0.5% rebate but the amc is only 1% and not 1.5%. I know you did say you were looking at funds with an amc of at least 1.5% though.

Yes, I'm only looking at actively managed equity funds. Bond funds and passive funds tend to have lower AMC's and have lower rebates. I did not examine these, all I wanted to compare like with like. (And I don't buy bond funds, nor do I buy the kind of passive funds that pay any commission).