Hargreaves Lansdown Dividend re-investment charges

planteria

interesting thread.
i use HL too, and i just accrue dividends as cash in my ISA and then just use them to buy another investment later on.
if there is a better alternative then i am open to ideas.

dunstonh

And a question for Martin. I know you 'don't do investments', but this would be a fantastic campaign that would save people £millions if you could expose these costs and help to drive them down.

HL have to change their charges before the end of the year. However, if you dont like their charges, then move to someone else. It doesnt need a campaign.

bowlhead99

johnrd wrote: »

So my specific question. Does anyone know of any way to hold shares in an ISA and still benefit from the company's own DRIP?

Basically this is a non-starter.

The Company (well, delegated to a registrar), maintains an official register of its shareholders at any point in time. Therefore on ex-div day, if a particular shareholder wants to get "paid in shares", they can arrange this - but obviously only if they know they are actually dealing with a shareholder directly and can check how many shares he has etc and what divi cash he would otherwise have received by cheque.

But you can't self administer an isa tax wrapper, and consequently you will be holding your shares through a nominee who is maintaining virtual accounts for all the underlying investors who use its services, and doing the tax compliance stuff.

This means that the Company only know they have an investor called Barclays Nominees or H-L Nominees or whatever who each own a few million shares for undisclosed beneficiaries and have one line on the share register each. So the Company and its registrar, can't practically carve up the nominees' entitlements between all the nominees' underlying holders and ensure the re-investment is all accurate and above board, because it doesn't know those underlying holders very intimately.

It is the Nominees who know what they have on your behalf, and if you are in a popular share they may offer their own reinvest program at a price that helps them cover costs. The price or minimum reinvestment size for this will be a function of their costs - driven by economies of scale with lots of customers doing it at once- and also market forces ( what deals do their rivals offer for that sort of service.

sabretoothtigger

£100 invested in 1899

In that year 100 would buy 100 soverigns or about £20,000 now so stating growth of about that is only keeping up with what a normal British coin sitting in a drawer would have done

HL are best for funds if you do use them. Halifax let you buy fractions, Im not sure anyone else does that

grey_gym_sock

bowlhead99 wrote: »

This means that the Company only know they have an investor called Barclays Nominees or H-L Nominees or whatever who each own a few million shares for undisclosed beneficiaries and have one line on the share register each. So the Company and its registrar, can't practically carve up the nominees' entitlements between all the nominees' underlying holders and ensure the re-investment is all accurate and above board, because it doesn't know those underlying holders very intimately.

well, if the company's DRIP scheme allowed a shareholder to enter only some of their shares into the scheme - e.g. of my 3 million shares, pay me cash dividends on 2 million, and enter the other 1 million in the DRIP - then this could work.

the nominee company would have to ascertain the wishes of all the individual shareholders, and add up how many shares to enter in the DRIP, and tell the company DRIP operator, and then divide the new shares received up appropriately. which would be tricky when that meant assigning fractional shares to individual holders - they might have to sell off the total fractional entitlements, and give the shareholders a little cash instead.

so not impossible, but it sounds like hard work.

and DRIP schemes probably don't accept elections for part of a shareholding - though that doesn't sound so difficult if they wanted to.

grey_gym_sock

sabretoothtigger wrote: »

In that year 100 would buy 100 soverigns or about £20,000 now so stating growth of about that is only keeping up with what a normal British coin sitting in a drawer would have done

see http://www.hl.co.uk/shares/share-tips/richard-hunter-weekly-comment/richard-hunter-weekly-comments-archive/four-investment-reminders

where they say it's from £100 to £24,000 in real returns. that's roughly 5% p.a. compounded, so plausible. gold is nearer to 0% real return.

sabretoothtigger

Gold is 0% real return I agree but I wonder how they would be measuring a real return

5% every year for a century is extraordinary performance if it really is increasing value not just price

I do know drip makes a very large difference, it also means no returns in the meanwhile.
I often take an income fund and decide myself when and where it should go - after being in FTSE last decade I realised the dividend income could make for a good reminder of how useful an investment is or in that case - lacking.

A share which never pays income is more tax efficient, unfortunately there is bias everywhere

adjusted for inflation

If we adjust for government inflation I think we find prices rise. Their focus is core academic measures, my focus is to not be poorer.

grey_gym_sock

5% compounded for a century is extraordinary, but i believe that's roughly what's happened over the last 100 years - at least if you pick 1 of the more successful markets, which does include the UK.

i don't think the same performance is possible over the next 100 years, due various finite resource limits which will be hit within that period.

Glen_Clark

I hold all my shares directly, so dividend reinvestment is free (apart from stamp duty)
But I don't do it anymore because I got fed up with another share certificate for every dividend.

johnrd

dunstonh wrote: »

HL have to change their charges before the end of the year. However, if you dont like their charges, then move to someone else. It doesnt need a campaign.

I understand I could leave - my point is there is nobody better to leave to, hence a campaign might force the fund managers to break ranks - or at the very least expose the huge costs which they obfuscate when quoting the growth rate with dividends reinvested.

I've a feeling that for share holdings where you might need 3 or 4 dividends to make the next reinvestment then holding in an ISA near as dammit negates the ISA tax advantages!