Which S&S ISA provider - Low cost trackers

saveonarola

gadgetmind wrote: »

No 0.5% in a SIPP for that HSBC fund but it's not index linked. The cheapest index linked gilt fund seems to be the Royal London one, but it's not a tracker as the 0.43% TER shows. Also the NSBC UK Gilt Index can't be bought online with HL.

You probably know better than me, but the cheapest index-linked tracker on HL seems to be Legal & General All Stocks Index-Linked Gilt Index (TER 0.25%), but that attracts the 0.5%+VAT surcharge, making it not so cheap after all. I've read about that HSBC fund only being available over the phone or with written instructions. You might find the comments under this piece interesting:

http://monevator.com/2011/05/24/how-to-buy-index-trackers/

gadgetmind wrote: »

I'm coming down to a HL SIPP with HSBC/Royal funds or sippdeal with Vanguard trackers. I should be able to avoid fees with HL (as long as I stomach the 0.43% on the RL gilt fund) and with sippdeal everything will be ever so slightly cheaper but there will be a £60pa fee.

Edit: The following was the first part of an attempt to use the stats provided on fund factsheets to analyse the performance of funds over time. Please note that if you read the following without reading the rest of the thread, you may get a misleading idea of the usefulness of these stats. The second part of the attempt is Post #43. Posts #47 and #49 on this thread describe the outcome.

I'm in the process of making an almost identical decision - between HSBC trackers with HL/iii, or a Vanguard LifeStrategy fund with AT/Bestinvest. For my level of investment, the charges are significantly lower with HL/iii, but I like the Vanguard philosophy and I love the convenience of the LifeStrategy funds. When I was looking for reasons to go with Vanguard, I started to check tracking errors, and I came across something that might interest you. Unfortunately, only two of the 'main' trackers follow the same index and so are directly comparable, and Vanguard hasn't been around long in the UK, so only two years' figures are available, but that limited data sample suggests that the HSBC funds have a tracking error that might be significant at higher levels of investment:

Performance: 31/8/09–31/8/10; 31/8/10–31/8/11

HSBC FTSE All-Share: 8.3%; 6.7%
Vanguard UK Equity: 10.4%; 7.14%
FTSE All-Share Index: -- ; 7.26%

HSBC European: -3.8%; 3.3%
Vanguard Developed Europe ex-UK Equity: -1.98%; 2.73%
FTSE All-World Developed Europe ex-UK Index: -- ; 2.96%

(I haven't quoted the index figures for 09-10 because I've just pulled these off the factsheets and they weren't quoted there.)

As I said, a very limited data sample, but that 2.1% difference in performance in UK Equity in 09-10 is significant, even taking into account Vanguard's initial 0.5% dilution levy. The near 2% difference in Europe is even larger, because that Vanguard fund charges no dilution levy. Okay, the figures for 10-11 look a lot better for HSBC (if you don't mind your tracker outperforming the index!), and it would crazy to draw any conclusions on the basis of two years' numbers, but still...

It's a shame that the other trackers can't be directly compared, but here are the figures, for what it's worth:

HSBC American Index (S&P 500 Composite: -- ; 11.2%): 8.1%; 12.2%
Vanguard US Equity Index (S&P Total Market Index: -- ; 12.3%): 11.0%; 12.11%

HSBC Pacific Index (FTSE World Asia Pacific ex-Japan Index: -- ; 11.4%): 18.2%; 10.7%
Vanguard Pacific ex-Japan Index (MSCI Pacific ex-Japan Index: -- ; 11.53%): 17.32%; 11.45%

HSBC Japan Index (FTSE Japan Index: -- ; 0.7%): -1.5%; 0.9%
Vanguard Japan Index (MSCI Japan Index: -- ; 0.27): -0.3%; -0.03%

One conclusion that can be drawn, again bearing in mind there are only two years' numbers here, is that Vanguard's funds really do track their indexes, their tracking error being pretty much exactly the fund's TER. Presumably this is partly explained by the dilution levy, which means that existing investors don't contribute to the costs of other investors buying and selling units, although I don't understand how Vanguard gets around the tracking error that would be caused by the costs of buying and selling stocks in order to track the index. HSBC's trackers seem to be a bit less attached to their indexes, but that does mean that they outperform sometimes.

Something to think about, anyway. I am very new to this, so I present these figures not in order to 'prove' anything, but just to contribute to the debate. There may be all sorts of obvious stuff that I've missed.

saveonarola

dunstonh wrote: »

I think the most important thing for anyone choosing a platform now is to keep an eye on the changes and make sure that the platform they chose now can re-register assets or transfer out at no cost. Don't pick one with transfer/exit penalties.

I've investigated four platforms. HL, iii and Bestinvest will all transfer cash to another platform/ISA with no charge, but all charge for re-registering stock. HL: £25+VAT per stock; iii: £15+VAT per stock; Bestinvest £25+VAT per stock. Alliance Trust charges £50+VAT (including for a cash transfer) and an additional £15 per stock for re-registering.

Does anyone know of a platform that will re-register stock for free? It looks like if you want to transfer for free, you have to sell and re-buy, so you will lose the spread whatever you do.

Edit: just to clarify, I'm talking about transfers between funds/shares ISAs here, not SIPPs

gadgetmind

JamesU wrote: »

Gadget, do you have a link to Sippdeal's Vanguard offerings?

I must admit that I just worked from the monevator article and hadn't drilled down further.

gadgetmind

saveonarola wrote: »

cheapest index-linked tracker on HL seems to be Legal & General All Stocks Index-Linked Gilt Index (TER 0.25%), but that attracts the 0.5%+VAT surcharge

This surcharge makes the Royal London index linked gilt fund cheaper, but it isn't strictly speaking a tracker.

Thanks for your tracker comparison - I guess I need to look even closer at Vanguard via sippdeal. I like the HL platform, but TER is important, and accurate tracking even more important.

JamesU

gadgetmind wrote: »

I must admit that I just worked from the monevator article and hadn't drilled down further.

Fine, so I am not going mad then! As we speak I am looking at the latest AT fund list where they have increased the Vanguard range further. But as mentioned earlier, I still fail to see merit in using Vanguard UTs given the intial charges/annual charge balance relative to say HSBC UT trackers or etfs on larger purchases.

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

JamesU

gadgetmind

JamesU wrote: »

But as mentioned earlier, I still fail to see merit in using Vanguard UTs given the intial charges/annual charge balance relative to say HSBC UT trackers or etfs on larger purchases.

Thanks. I think I've now done my own research regards the situation on HL with the HSBC/L&G/RL combination, so I maybe need to fully cost it with sippdeal and AT.

gadgetmind

JamesU wrote: »

But as mentioned earlier, I still fail to see merit in using Vanguard UTs given the intial charges/annual charge balance relative to say HSBC UT trackers or etfs on larger purchases.

OK, I've looked at charges for a sample HL/HSBC portfolio and a sippdeal/Vanguard one. On each £100kpa, the Vanguard route is £160 cheaper as a result of weighted TER (0.213% versus 0.372%), BUT there are upfront fees of between 0.1% and 0.5% to Vanguard, £9.95 a deal to sippdeal, and £60+vat a year holding fee to sippdeal. Their EM fund also seems to have a 0.4% exit fee.

Of course, all of this is penny pinching if the HSBC trackers don't track as well and fall behind the index. As it happens, and initial squint at the HSBC FTSE trackers suggests they do suffer from high tracker error, which accumulates over the years. However, a bit more prodding (and re-reading saveonarola's comments in the similar ISA tracker thread) suggests this is because HSBC don't charge an up-front fee but do have to pay SDRT of 0.5%. This can't be shown in the TER, but will instead show as tracking error.

Vanguard pass the full 0.5% onto the customer, which means LTBH peeps don't subsidise those who thrash around more.

I guess it all comes down to how long I intend to remain with HL and HSBC trackers. RDR etc. might suggest that minimising trading and up-front fees to maximise agility makes sense right now.

gadgetmind

JamesU wrote: »

Gadget, do you have a link to Sippdeal's Vanguard offerings? Interested to see how they compare with Alliance Trust. Sippdeal fund list I checked below, but cannot find any Vanguard funds here:

I have seen many online comments from people who say the Vanguard funds are all shown when you do a trade with sippdeal, and if you contact them, they will tell your about the range of funds and warn of the £12.50+vat per quarter fee for holding them.

nufc_fan

I opened an account with iii but I am having trouble buying certain funds through the regular investment option. For instance I can't find the legal and general emerging markets index tracker but when you search for fund info it states it is available! Any hints, not impressed by the usability so far!

saveonarola

gadgetmind wrote: »

Of course, all of this is penny pinching if the HSBC trackers don't track as well and fall behind the index. As it happens, and initial squint at the HSBC FTSE trackers suggests they do suffer from high tracker error, which accumulates over the years. However, a bit more prodding (and re-reading saveonarola's comments in the similar ISA tracker thread) suggests this is because HSBC don't charge an up-front fee but do have to pay SDRT of 0.5%. This can't be shown in the TER, but will instead show as tracking error. Vanguard pass the full 0.5% onto the customer, which means LTBH peeps don't subsidise those who thrash around more.

I've just noticed a couple of problems with the stats that I presented in my long post earlier in this thread. I've added an edit to show the problems and I will edit the comment again when I have answered these problems to my satisfaction. Sorry - problem of this sort of amateur financial sleuthing.

As ever, DYOR everyone.