Unbundled Platforms

Totton

Are there any unbundled platforms available to the private investor? Currently I use HL but am looking at alternative due their charges for my ISA which holds IT's (£200 pa)

dunstonh

I dont know the DIY ones well at all but are selftrade?

Unbundled platforms charge you explicitly and rebate all commission. Including the platform hidden commissions. So, if you were using Inv Perp High Income, for example, you would pay around 0.75% for that instead of 1.5%. However, the platform would have an explicit charge for using them on top of that.

JamesU

Totton, Alliance trust may be a good option, "transparent costs with full trail rebates" (see Jamesd and Dunstonh post below) and may be more suitable. The funds list is less exhaustive than Hargreaves Lansdowne but I quite like it. Totton cost analysis required depending on trading costs and fund sizes.

dunstonh wrote: »

So, if you were using Inv Perp High Income, for example, you would pay around 0.75% for that instead of 1.5%.

But now I am confused! Using the example Inv Perp High Income at optimal 0.75% you mention, at Hargreaves Lansdowne this is 1.5% (most expensive for obvious reasons). Yet at Alliance Trust this is 1% (1.5% less full 0.5% rebate). Out of curiosity, are you able to purchase Inv Perp High Income at 0.75% or is this a mix up with say, Inv Perp monthly income (1.25%, less 0.5% rebate, 0.75%)? Or is there a seperate cryptic 0.25% rebate floating around somewhere?

http://www.alliancetrustsavings.co.uk/pdf/list-of-funds.pdf?

JamesU

jamesd

As well as the 0.5% commission to an IFA funds pay part of the annual management charge to the platform that hosts the fund, like HL or Alliance Trust. That's the extra quarter percent. Or in HL's case if last week's FT is to be believed, the 0.9% (including the IFA cut that they also take). Removing the platform fee from the fund price is a key part of what makes a platform unbundled, the unbundling being the stripping of the hidden payment from the fund and conversion to an explicit charge paid by the investor.

dunstonh

But now I am confused! Using the example Inv Perp High Income at optimal 0.75% you mention, at Hargreaves Lansdowne this is 1.5% (most expensive for obvious reasons). Yet at Alliance Trust this is 1% (1.5% less full 0.5% rebate). Out of curiosity, are you able to purchase Inv Perp High Income at 0.75% or is this a mix up with say, Inv Perp monthly income (1.25%, less 0.5% rebate, 0.75%)? Or is there a seperate cryptic 0.25% rebate floating around somewhere?

That means Alliance Trust are keeping the hidden commission (the bit referred to in the FSA paper that is coming and those threads you have seen me talk about). Hidden in in that you dont know how much of that 1% is going to the platform.

In simple terms which are not accurate figures but a guide (cant be accurate as the rebate varies with platforms), here is an idea of how your 1.5% AMC fund is split
0.5% IFA, 0.3% platform, 0.7% fund house.

The bigger the platform the more the fund house rebates back to the platform. So, some may see 0.2% platform, 0.8% fund house whilst others may be 0.5% platform, 0.5% fund house.

An unbundled platform rebates the platform cut back to the consumer so you are only paying the fund charge. In the case of inv Perp high income that would be around 0.75%.

Totton

Thanks for those helpful responses, I will begin looking at the others such as ATS. I recently completed a survey for HL after they mentioned changes this summer to their charges but there was no mention of that on the survey form. (Other than my comment to them :-))

Thanks again,

JamesU

dunstonh wrote: »

That means Alliance Trust are keeping the hidden commission (the bit referred to in the FSA paper that is coming and those threads you have seen me talk about). Hidden in in that you dont know how much of that 1% is going to the platform. In simple terms which are not accurate figures but a guide (cant be accurate as the rebate varies with platforms), here is an idea of how your 1.5% AMC fund is split 0.5% IFA, 0.3% platform, 0.7% fund house.

Understood. So the crypic 0.25% is most likely the platform charge. Seems quite a lot to take really, but do not have info on other providers to compare that figure against. Yes, roll on RDR and hopefully transparency, even if it costs more.

I have no problem with costs. If there is a % trail comission rebated to IFAs for work performed, fine. If there is a % rebate to the fund house for the platform used, fine, service provisions costs money and it is a business. And if fund managers have their % commission +/- costs within the fund that is also fine (no active vs passive vs performance debates needed, just being generic on transparency of costs here). But yes, I really object to not knowing what these charges are. With clarity on costs, consumers can at least make a more informed choice on the funds and platform used.

In any case, refocusing back to the thread, the trail rebates at Alliance Trust still look attractive relative to Hargreaves Lansdowne. Depends on cost analysis.

JamesU

jamesd

If you're currently using Hargreaves Lansdown they were quoted in the FT as saying that they would tell any customer who asked what they were being paid. If I recall correctly the last report I saw to investors said that they were making a little under 0.8% on all money with them. Since that would include after rebate money on the ISA and fund accounts that's pretty high compared to more normal platforms.

As a purely pragmatic matter I've declined to transfer money to HL that would greatly increase the amount of money I have there. Instead I'm looking to move away the money that is already with HL. This was decided before the recent press attention: HL is simply uncompetitive on charges, particularly for the SIPP, once the amount gets significant. Not that there aren't worse places, but I don't have to pick the worse places either. The pension charging is driving this but the ISA and unwrapped money where HL is a bit more competitive will follow.

The apparent desire to keep all of the platform and IFA money also eliminated them from consideration for a quite large company scheme, a few hundred million worth of assets under management, after just the first email exchange asking about costs. Many of the trustees have personal accounts with HL so it was HL's business to lose. They did, at the first hurdle.

It's a shame, though. In many ways they are exemplary and I'll continue to recommend them where it makes sense to do that.

cepheus

I used to use idealing for ITs. They charge £20 a year for an ISA irrespective of the holding, and about £12 a trade. They are very competitive for shares and ITs, HL is one of the best for UTs though.

https://www.idealing.com/help/jacket.jsp?helpPage=services20060104.html

There should be no need to pay hundreds of pounds in charges to brokers just for holding an ISA. These charges will be crippling for smaller accounts.

Reaper

jamesd wrote: »

HL is simply uncompetitive on charges, particularly for the SIPP, once the amount gets significant.

Yes, I am also planning to move my SIPP away from them, but thought I'd wait until the dust settles before looking an the alternatives.

JamesU

cepheus wrote: »

I used to use idealing for ITs. They charge £20 a year for an ISA irrespective of the holding, and about £12 a trade. They are very competitive for shares and ITs, HL is one of the best for UTs though.

Agreed, i-Dealing are great, I have used them for over 10 years. The annual charge has always been £20/yr (inc VAT). Trading is lower at £9.90 though, only need to add £2/trade if you set up a stop or buy/sell limit order. i-Dealing really good for ITs, etfs and shares and some useful international trading at £9.90 aswell (e.g. perfect for a lot of EU/US etfs listed on NYSE and XETRA). But for sure, i-Dealing do not do UTs. I often recommend i-Dealing for non-UTs on threads.

Think Totton wanted an alternative to Hargreaves Lansdowne to hold funds and ITs under the same umbrella, but with better rebates on the funds held, and without the additional 0.5%/yr charged on ITs at HL. Alliance Trust definitely worth considering instead of Hargreaves Lansdowne for this.

When I looked into providers for UTs with rebates, felt Alliance Trust was the best compromise for DIY purposes. One thing I forgot to mention though. When I phoned AT on some details, they had only just launched their i.invest platform for £1.50/trade but the procedures were not explained clearly. Probably too soon off the mark then, AT is adding more detail on their website now. Sounded straightforward on the normal route i.e fund the ISA with cash and then larger fund purchases at £12.50/trade. But unclear on logistics of i.invest fund purchases. From what I understand so far, cash within the AT ISA can be used for £12.50/trading from the fund list, but that cash cannot be used for the i.invest £1.50/trading which involves direct debit payments and purchases using cash outside of the ISA. Also it is not clear if all the funds available at £12.50/trade from the fund list are also all allowed for purchase on the i.invest £1.50/trade for any cost averaged route. So need to further clarify logisitics of ISA funding and decide how much cash to have in the ISA for £12.50 fund list purchases vs cash added to the ISA from annual allowance for any i.invest purchases by direct debit before setting one up. Similarly think funds set up for purchase on the i.invest order book can be changed and varied, but not sure how this works. Have not had time to clarify these finer details with AT yet, has delayed setting up an ISA with them on my side.

And for sure, athough Hargreaves Lansdowne may not be competitive enough on cost for some people's needs, they still provide a really user-friendly option for many new to investing, those who want to DIY, and when using an IFA is not cost-effective. Whichever way I look at it, HL are a still a class act, excluding over-marketing and gifted Cross pens of course.

JamesU