Switching to HSBC C Class Shares

BettySpofkins

I invest in several of the various HSBC tracker funds, and my broker, TD Direct, are offering (well, railroading me into) the newer C Class shares. That's OK, since it knocks about 10 basis points off the TER.

But I'm left holding a stack of the older, pricier, shares and wondering what's the best strategy to migrate over?

Is a broker likely to be able to switch automatically, or am I going to have to try co-ordinated buying and selling, and hope I'm not out of the market during a rally?

I'd ask TDD but I can't get through (it's Christmas eve, I forgive them).

RetiredInThailand

Like most things in finance, these C class shares aren't quite the bargain they are made out to be.

http://monevator.com/c-class-hsbc-index-funds/

Your broker is probably pushing them because they will charge you some extra fee for holding them. What a surprise!

BettySpofkins

Thanks, I read that a while ago. As it stands, TD Direct charge exactly 0p extra, so for now I'm perfectly happy.

bowlhead99

In my TD account whenever I go to place an order I have a 'Personal Trading Level' shown on that screen. It's some function of my current and projected cash balance and (I think) the value and type of the other holdings in my portfolio.

Per TD help page
Your PTL is allocated to you by TD and lets you trade up to a certain amount immediately without needing the cash in your account beforehand. This gives you the time to transfer money into your account and allow it to clear for when payment is due.

So effectively this is my credit limit for placing orders and I can place an order up to that limit to buy a share that settles in 3 business days (or extended settlement 10 or 20 days) and then meanwhile go and do a matching sale or put more cash in or whatever to fund it. If I'm late in arranging cleared funds I would be hit with a charge and if I didn't remedy it they'd sell some of my portfolio at random to meet the shortfall.

So in your situation if the C units I wanted to buy were within that limit, I would just go and buy them and then place an order to sell my old units which would settle on the same day. Effectively I'd never be 'out of the market'.

If I was doing this in my TD ISA account though, I'd have a problem because there my PTL is simply set to the current cleared cash available (presumably that part of the trading software doesn't know if you have any ISA capacity to inject another, say, £2,000 into your account over the next few days, and it is just working on a cleared cash basis because brokers aren't supposed to allow you to trade on margin in an S&S ISA).

So if I only had £100 of cash and £2,000 of old HSBC units, I couldn't order £2,000 of new HSBC C units until I'd sold at least £1900 of HSBC to generate the funds in the ISA. As fund orders have a lead time to be placed and get settled, I'd assume there is a risk of being out of the market which might work in your favour or might not (US fiscal cliff looming!).

I've never needed to do what you're proposing so if the value is above your PTL I would suggest just phoning them up and saying you just want to sell one fund and buy into another without being out of the market, perhaps they can arrange it as a phone order as an unpublicised customer service feature. Never know if you don't ask.