New Index Tracker charges on HL - please help a newbie investor

bobsy31

Hi

I am relatively new to investing, having started investing only 6 months ago. Every month I put 850 pounds amonth into my HL s&s ISA and then spread this across a number of funds.
My plan is to continue with this monthly plan for 25+ years ie until I retire.

I have the HSBC Trackers that I pay monthly into, including ftse all share, ftse250, european index and american index. I chose them primarilly because of cost, while also to implement the 'core and satellite' approach.

As there is only a 300 pounds in each of those funds at the moment these new charges are fairly substantial! If these charges weren;t there I would've have carried on with my relatively 'passive' monthly plan that I currently have.



I have read all the posts on here referring to HL's new charges on tracker funds, and was hoping if people could please offer some input as to what you would do around the trackers I have if you were in my position and had my original plan.

I am planning to open an ISA in my other half's name to invest in further funds and shares but this was very early in my thoughts as I am still researching.

Many thanks in advice all

Tammer

Excuse me for asking a daft question but what charges are you referring to?

Are the charges not a %?

{apologies, I've since seen an earlier post about £2 per month charges coming into effect from HL}

bobsy31

Sorry just tweaked my post and my title. I am referring to the new £2 per month charges HL are bringing in on the HSBC trackers funds

fieldofdreams

Cant advise but Im in a similar boat - been with HL for a couple of years and have been really happy with the service and platform. I hold 7 funds, 4 of which are HSBC trackers so these new charges are significant to me and are enough to make me seriously think of moving elsewhere

jimjames

This thread may help

https://forums.moneysavingexpert.com/discussion/3620493

4 HSBC funds with HL would give £2 each pm x 12 so £96 charges. For small portfolios that would be pretty significant and may even mean it is worth paying for a fund that has higher TER to avoid the charges.

SnowMan

jimjames wrote: »

This thread may help

https://forums.moneysavingexpert.com/discussion/3620493

4 HSBC funds with HL would give £2 each pm x 12 so £96 charges. For small portfolios that would be pretty significant and may even mean it is worth paying for a fund that has higher TER to avoid the charges.

With £1,200 in 4 funds that means indeed a charge of £96 per annum.

Those funds I think all have a TER of around 0.3% so based on a fund of £1,200 bobsy's charges are going up by a multiple of 27 (yes 27 gulp) albeit that multiple will go down as his funds increase. So for each £1 he was paying in charges he will now pay £27.

It really shows how unpleasant this sudden platform charge is to see such a ridiculous increase so soon after he has opened an account with HL and to be only given 30 days or so to do something about it is not good.

Furthermore HL are going to charge bobsy a hefty ISA transfer fee if he transfers out and that is if he can find somewhere which will accept a relatively small fund.

And not just one transfer fee, one per fund, for transferring out, that is if he can find somewhere to move it.

And the Investment Times says they aren't even going to write to him to tell him that his charges are going up in this way.

Bobsy you should in the first instance complain to HL about this, it is outrageous.

Clearly transferring the 4 funds into 1 fund which is not subject to the platform fee has some merits and is a good suggestion. But you have to ask yourself do you want to remain with a firm like HL who can act in this way.

I think a lot of us are struggling to work out what to do here. Hopefully some ideas will develop shortly that will help you.

Ark_Welder

A potential problem of moving to another provider is that that provider could also introduce charges for the same funds. If HL don't make any money on them, then neither will anyone else. Perhaps a platform provider that has a fixed or capped fee for the platform, irrispective of the types of assets held (e.g. funds or shares) might be worth a look.

Six months contributions amount to £5100. As the timescale is 25 years, then being out of the market for a couple of weeks now means that there is a long time to make up for any gains that are missed - assuming that there are gains to be made! So transferring from HL as cash might be an option.

The OP hasn't stated where the remainder of the monthly contributions are going: £300 per fund mentioned over six months suggests £50 per fund per month, i.e. £200. So there is £650 that is going elsewhere. An alternative to moving from HL would be to redirect this amount into the trackers to bulk up the holdings. This would have the effect of reducing the percentage of the fees-to-assets more quickly.

Aegis

SnowMan wrote: »

Furthermore HL are going to charge bobsy a hefty ISA transfer fee if he transfers out and that is if he can find somewhere which will accept a relatively small fund.

On the plus side, at least this fee only applies to in specie transfers. If he sells to cash and transfers that way, it's free.

SnowMan

Ark_Welder wrote: »

A potential problem of moving to another provider is that that provider could also introduce charges for the same funds. If HL don't make any money on them, then neither will anyone else. Perhaps a platform provider that has a fixed or capped fee for the platform, irrispective of the types of assets held (e.g. funds or shares) might be worth a look.

A good point.

I wonder whether a regular contribution to the Fidelity Moneybuilder UK index tracker (tracks the all share index) might be part of the solution for bobsy. Getting this direct from Fidelity MAY offer some protection against hiked charges or platform fees. At 0.3% TER the TER is very close to the HSBC equivalent.

The other Fidelity moneybuilder trackers such as the European tracker are a bit more expensive in terms of the TER than the HSBC equivalent but are still reasonable.

bobsy31

"The OP hasn't stated where the remainder of the monthly contributions are going: £300 per fund mentioned over six months suggests £50 per fund per month, i.e. £200. So there is £650 that is going elsewhere."

Thanks for comments so far, apart from complaining to HL I am still very much confused!
To answer the above comment, 50 pound a month goes into my four trackers, the 650 goes across 13 more funds (50 pounds each).

I have only been doing this 6 months, the plan was to build up a core amount in each of these funds over the first 5 years of my investment life.

Anyway back to my original post, what on earth to do about these new charges and whether to change my plans - eeek!

robmatic

It's effectively no longer worth using a passive investment strategy with HL if you have a smaller pot. I have the usual basket of HSBC trackers which I've been dripfeeding into over the last year and a half, but I'm just going to switch these into a couple of actively managed funds as this will be more cost-effective in terms of charges.