Changes ahoy at the HSBC Global Investment Centre

SnowMan

I rang the HSBC Global investment Centre to check on their plans.

They are now telling me they are planning on putting the clean C class of funds onto the platform in March 2013 (they had previously said they might be doing this in January).

The existing retail funds (legacy funds) will continue as they are at present so won't be converted to clean classes.

He didn't know what platform fee would apply for the clean classes (they had previously told me it would be 0.29% pa).

Would be interested in what any other GIC customers are able to find out on calling the HSBC GIC.

verybigchris

I got the details of the fee changes in the post today, and it's a bit of a mess.

Clean classes will become available for some funds from 28th January, even though they won't charge the account fee until May. Once a clean class is available you can no longer buy into a legacy fund, although you can still hold them in GIC for as long as you want. The clean funds will attract a platform fee of 0.39% per annum, which is taken from your settlement account monthly in arrears. It's not clear whether people who buy clean funds before May will get a bill for back-dated fees.

I'm struggling to see how that will work with an ISA. Since they made changes in December, the ISA settlement account became a separate entity, and putting money there counts towards your ISA limit. Suppose I use my full 2013/14 allowance in April to buy clean funds. In May I'll get my first bill for account charges, only if I move more new money into the settlement account to cover it then I go over my subscription limit?

SnowMan

Got the same mailing. 0.39% platform fee for clean classes will mean an extra 0.29% pa charge (0.39% less 0.1% lower charge for clean class) for holding the clean class as opposed to the legacy class of HSBC trackers.

Some of the main quotes from the HSBC GIC Q and A.

We intend to introduce an Account Fee in May 2013 charged as an annual percentage rate and calculated using the value of any holdings in clean share classes within your Account. The annual percentage rate for the Account Fee will be 0.39% per annum.

If you wish you can continue to hold your existing legacy share classes even when they are removed from sale until you either sell or switch out of the fund

All new investments switches and top-ups must be invested into clean share classes once a clean share class is available through GIC for your chosen fund. If there is no clean share class available on GIC for your chosen fund then all new investment switches and tops ups must continue to be invested into the legacy share class if its still on sale on GIC.

newfoundglory

Since other platform providers are charging now, does this mean HSBC will still be competitive for trackers?

SnowMan

newfoundglory wrote: »

Since other platform providers are charging now, does this mean HSBC will still be competitive for trackers?

For existing legacy funds 'yes' but no new money will be able to go into those shortly.

For new clean classes currently 'no'. For example you can continue to get the retail class of HSBC trackers via Fidelity Fundsnetwork without additional charge which works out 0.29% pa cheaper. Fidelity seem to be delaying until the last possible moment to react, but of course they will have to act when platform RDR comes in perhaps early 2014.

For those with large funds the flat fee models are going to be best. So the likes of ATS, Best Invest or Sippdeal who currently are going down the flat fee model, albeit with lots of other charges such as dealing charges.

For smaller funds the GIC charges may be comparable with other providers when it all settles down.

And something unexpected could happen which would change everything. Vanguard might suddenly offer their funds direct to customers on smaller amounts and with ISA wrappers, perhaps with just a small administrative charge on top of the fund charges that just covers their costs (oh I dream).

It is hard to say where this will all end up.

SnowMan

I'm not sure I believe it, but the HSBC GIC are telling me that you can switch between HSBC legacy trackers after the clean classes come onto the platform which for the HSBC clean trackers is going to be the end of the month so they tell me. So in 2014, I can switch say from HSBC all share index retail to the HSBC Pacific retail index fund.

They are saying you can't switch between other legacy funds once the clean classes are on. But specifically you can switch between the HSBC legacy trackers. And you can't put new money into the HSBC legacy trackers of course.

If there was some truth in that then it becomes quite interesting.

They confirmed again there is no option to invest direct with HSBC in HSBC trackers.

Apparently those investing through an IFA invest through their Selected Investment Funds platform but it appears this will also have a 0.354% platform fee.

SnowMan

I have been looking at my options and wondered if Best Invest might be a good home for my HSBC trackers now that HSBC GIC and TD Direct are introducing a massive percentage platform fee and Fidelity Fundsnetwork are going to have to act at some point.

With a good sized portfolio a flat platform fee works much better for me than a percentage platform fee.

I was looking at transferring to Best Invest and rang them up to enquire.

They are not going to have the clean class of HSBC trackers on the platform in the immediate future and possibly they will be on around the end of the year.

They are waiting for the RDR platform paper before deciding what they do about RDR and will probably make a decision in the Summer. They could give no indication whether they will be going the flat platform fee or percentage platform fee route.

JohnRo

I'm with Best Invest (and TD but that'll likely change) and made similar enquiries with BI. Like you, the response I got was non committal.

My hope is that the current flat custody charge of £60pa for holding any number of non-commission paying funds on their platform becomes their standard platform fee post RDR. I hold several Vanguard funds with them amongst others.

I'll be watching with interest to see what they do decide about explicit charging over commission based elements in fund pricing since that's obviously a major part of their business model which allows for charge free buying, selling and switching with them.

trevor.dubois

From reading the HSBC Funds Porfolio and ISA Funds Portfolio (Jan 2013) document I understand there will be a 0.39% per annum platform fee.

I also used the candid money compare fund platforms tool and after choosing HSBC and Blackrock trackers (which are relatively expensive), I received the result that rPlan will charge 0.34% per annum. Considering the fact that the Blackrock trackers are more expensive than the HSBC trackers which I chose, this appears to be a much better deal than the HSBC deal (that is, if I only picked HSBC trackers I could have received an even lower annual cost).

1. My question is that am I correct in understanding that investing with rPlan is more cost effective than with HSBC GIC or am I missing some information?

2. Also, the comparison platform gave results for the cost of Bestinvest for the same trackers and the total TER was 0.39% and there is an annual cost of £60, whereas rPlan have no annual cost and a TER of 0.34% as the total net cost. Thus, again, am I right in thinking that rPlan is the better investment choice of would Bestinvest offer something extra (I am only concerned about cost, less so about customer service and ease of use BUT automatic dividend reinvestment would be nice)? I ask this because I see a lot of talk about firms such as Bestinvest but less discussion of other firms such as clubfinance, rPlan, Massow's paymemy and so forth.

3. Finally a general question - what's the cheapest platform for holding HSBC trackers (I wouldn't mind holding HSBC, Vanguard and Blackrock trackers on - the ones I am interested in - on different platforms)?

Many thanks for the advice

grey_gym_sock

there are different fund classes for both HSBC and blackrock trackers. "dirty" classes have higher TERs, from which they pay commission to platforms, who therefore don't usually charge you more to hold them, and might even rebate some commission to you. "clean" classes have lower TER, pay no commission to platforms, and therefore platforms are likely to charge you extra to hold them.

the candid money tool seems to give you whichever class is available on each platform, which currently varies. you can identify the the class by the TER (before any rebate), though the TER displayed can differ very slightly for the same class on a different platform.

HSBC trackers come as either "retail" class (dirty), or (new) class "C" (clean). the latter have TERs about 0.1% lower.

both GIC and other platforms have been offering the "retail" class with no extra platform fee, i.e. it the net cost is the TER.

GIC is going to charge 0.39% for class "C", not for "retail". but they're going to prevent new investments in "retail". so on the GIC, "C" will be overall 0.29% more expensive than "retail".

some other platforms still have "retail" with no extra charge. though this is unlikely to last.

similarly, blackrock trackers come as either class "A" (dirty; TERs around 0.5x%), or class "D" (clean; TERs around 0.2x%). though few platforms have class "D" yet.

for smaller holdings of HSBC trackers, it's currently cheapest to hold the "retail" class on a platform which charges no extra fees, e.g. cavendish, rplan, bestinvest, or even the GIC - if they haven't stopped new investments yet (not sure).

for very large holdings, it would be cheaper to hold class "C", e.g. on alliance trust. lower TER, but extra fees.

if you start paying fixed platform fees (as opposed to just percentages), it may be cheaper to combine all funds on the same platform.