H-L introduces a Tracker Platform Charge

westy22

I may be wrong but I think that the difference in past performance between the Inst and the Retail versions of the HSBC All Share may be due to factors other than just the TER - the Inst seems consistently better and by more than 0.02% pa. Maybe those more knowledgeable than me can interpret the Morningstar data for the 2 versions and give an opinion- please.

By the way, HL don't offer Inst versions of all the HSBC trackers - just the All Share.

SnowMan

westy22 wrote: »

People who are HSBC FTSE All Share Index investors should bear in mind that HL is providing the 'Institutional A' version of the fund (ISIN GB0031008443) which is a marginally better performer than the 'R Retail' version (ISIN GB0000438233) offered by most other providers. If you have more than about £10,000 in the fund then you may find the Inst version performance benefit more than covers the £24 pa cost.

That is interesting.

My understanding was that there are different versions of the HSBC all share tracker see here and here, but provided the version you choose now has an AMC of 0.25% AMC then ignoring platform charges you could expect almost identical returns.

Historically there was a retail version that had an AMC of 0.5% (I think it was 0.5%, it might even have been 1%), that was how I ended up with HL in the first place, to get the lower institutional version 0.25% AMC.

So is this a purely historical effect from when the retail version had a higher AMC?

You might expect very slightly different returns if the size of the funds was different but you should see that effect partly through the difference between the TER and AER, although some costs such as rebalancing may not be reflected in the TER. I don't think the TERs quoted by different platforms/sources are always up to date and that can explain different figures.

I am a bit confused now to be honest.

Was thinking of getting the all share tracker via the HSBC Global Investment Centre, they quote a TER of 0.27% here.

westy22

So is this a purely historical effect from when the retail version had a higher AMC?

I don't think so (though I am happy to be corrected by others if I am wrong) - the 2010 figures for Total Return on Morningstar seem to show that the Inst was 0.24% higher in 2010 and the change of AMC for all HSBC funds happened in 2009 IIRC. Historically (pre AMC reduction), the Inst seemed to be 0.38% pa better

westy22

You might expect very slightly different returns if the size of the funds was different

They are different - the Inst version share size is 23.81m against 169.31m for the Retail version

SnowMan

westy22 wrote: »

They are different - the Inst version share size is 23.81m against 169.31m for the Retail version

I think I have run out of ideas to explain it.

I did monitor tracking errors for 4 different all share trackers I had a while back over a number of years taking out the effect of the different TERs. Every time I thought I had identified a systematic tracking error it seemed to reverse itself.

So I have given up trying to look at tracking errors and look purely at the TER.

But that is just a personal approach.

gadgetmind

SnowMan wrote: »

So I have given up trying to look at tracking errors and look purely at the TER.

There is more complexity, I'm afraid as some trackers such as Vanguard increase value by lending out securities.

https://www.vanguard.co.uk/documents/adv/literature/securities-lending-still-no-free-lunch.pdf

koru

gadgetmind wrote: »

Bestinvest do not (yet!) apply this fee to HSBC trackers. They do for Vanguard, but I'm better off paying the fee rather than suffering the higher TER and tracker error of HSBC.

Thanks, I did not realise that Bestinvest have no custody fee on the HSBC trackers. In my case, I only use HSBC for the Japan and Pacific trackers, where the TER is similar to Vanguard. They are within SIPP wrappers, so I think that for now I might switch from HL to Bestinvest. There is always a risk that they will extend their custody fee to the HSBC trackers, and I might need to switch again. But at least they are paying £300 cashback for transfers of SIPPs bigger than £50,000 (and they will reimburse the HL exit fees), so it won't have been a complete waste of time even if I have to do a second switch quite soon.

gadgetmind

koru wrote: »

Thanks, I did not realise that Bestinvest have no custody fee on the HSBC trackers.

Here is chapter and verse.
https://select.bestinvest.co.uk/investment-guidance/investor-insights/2011/wide-investment-choice

But at least they are paying £300 cashback for transfers of SIPPs bigger than £50,000, so it won't have been a complete waste of time even if I have to do a second switch quite soon.

SIPPs, ISAs, and (I think) unwrapped which is nice.

Rollinghome

dunstonh wrote: »

Sorry, had a moment when I thought I was still in 2010 clearly.

However, the question is still valid, even if its a year away. Although I do expect another set of charges to replace these will come once the FSA platform review moves on.

There is the possibility that the FSA will allow bundled platforms if the likes of HL and other bundled platforms lobby hard enough. However, it really does not sit with the objectives of the RDR and the Consumer Panel objection to bundled platform was seen by many as the key thing which steered the FSA towards their position.

Which is why this move is hard to understand. Come the end of next year managed funds will earn them no more commission than current commission-free tracker funds – i.e. zilch. So why are they p***ing off those clients now?

I could understand it more if the motive for the charges was to elbow out their less profitable clients, just as Selftrade did a while back (not necessarily a smart move as young small investors can be become old bigger investors). But this won’t achieve that. They’ll have clients with large pfs that are overall very profitable to HL but who are going to be very peeved at suddenly being asked for more just because they have a tiny percentage in a tracker or two – especially if they don’t know until after it’s implemented. On the other hand they’ll still have unprofitable clients with a very small sum spread across a large number of managed funds yet unaffected by the new charges.

If the plan come RDR is to charge a straight £24pa per UT holding it will seem odd that someone can hold a dozen ITs with no account charges outside of an ISA or limited to £45pa inside an ISA but holding a dozen UTs either in or out of an ISA will cost them £288pa. Springing surprises on their clients so they don’t know what’s coming next will unsettled them. The comments on this board shows they’ve already lost a lot of goodwill.

So are HL just very stupid or is there something else going on, perhaps to do with the lobbying of the FSA on platform charges?

ki707

Hi everyone

Has anyone looked at how much you would need to have in the affected funds to make the new platform fee cost effective? A news article on This Is Money (on the HL increased fees - sorry as I'm new, I can't paste the link) does a rough analysis with a TER of 0.5% (with the £1 fee, you'd need £2,400 in the fund. With the £2 fee, you'd need £4,800). My maths is rubbish!

Thanks!