H-L charging structure

dunstonh

Out of the blue, HL have introduced what they call a "suggested minimum cash balance", which they say is to ensure that the client always has enough cash available to pay any fees and charges!

Most unbundled platforms do the same. It avoids sales of investments to meet fees. With HL having to move that way from their current bundled pricing, this is a logical first step.

I am very suspicious. Does this herald the advent of a large periodic fee or perhaps new dealing charges under a revised charging structure?

In the unbundled world where charges are disclosed fully and not hidden with smoke and mirrors (as the current HL platform is), you need the cash account to handle the bulk of the charges.

Also, I thought it was against HMRC regulations to hold cash within a Stocks & Shares ISA unless it is specifically for the purpose of investing the cash in stocks & shares or funds.

No its not.

WaltD

jamesd wrote: »

For the ISA there's no charge for a cash transfer out and that may work for some of the things you hold, where it's not cheaper overall to pay the £25+VAT to transfer a holding.

If you prefer to transfer to another platform provider as funds (in specie) rather than as cash, you can minimise the transfer fee by temporarily switching all your fund holdings into a single OEIC before you do the move. Then you only pay one £25 transfer fee.
:rotfl:

WaltD

dunstonh wrote: »

Quote:
Also, I thought it was against HMRC regulations to hold cash within a Stocks & Shares ISA unless it is specifically for the purpose of investing the cash in stocks & shares or funds.


No its not.

I beg to differ.

" http://www.hmrc.gov.uk/isa/faqs.htm#25

"Holding cash in the stocks and shares component.
Cash may only be held in a stocks and shares ISA to invest in qualifying investments (see What can stocks and shares ISAs include?). This includes cash subscriptions, interest and dividends, and proceeds from disposals of qualifying investments that have not yet been reinvested."

Many thanks for your other observations.

WaltD

Hmmm. Well, we won't know the solution until all the platforms announce their post-RDR charging structure, but at the moment I am minded to consider moving my FUND holdings to a less expensive platform (maybe Cavendish, BestInvest or Sippdeal) and keeping my exchange traded investments (ETFs and shares) with HL ... so long as they keep the £45 pa cap for these within an ISA.

BTW, does anyone have any experience of Sippdeal as an ISA provider? They are one of the very few self-select, online providers who deal in both funds and exchange-traded securities.


Then again, maybe it's worth paying a little more for a professionally operated, reliable platform with excellent user support - which I have always found HL to be!

dunstonh

WaltD wrote: »

I beg to differ.

" http://www.hmrc.gov.uk/isa/faqs.htm#25

"Holding cash in the stocks and shares component.
Cash may only be held in a stocks and shares ISA to invest in qualifying investments (see What can stocks and shares ISAs include?). This includes cash subscriptions, interest and dividends, and proceeds from disposals of qualifying investments that have not yet been reinvested."

Many thanks for your other observations.

you are misinterpreting what it says. A cash account with a platform handles subscriptions, interest and dividends, proceeds from disposals along with payment of tax, rebates from tax, charges and rebates of charges as well as any other misc transaction.

Froggitt

WaltD wrote: »

If you prefer to transfer to another platform provider as funds (in specie) rather than as cash, you can minimise the transfer fee by temporarily switching all your fund holdings into a single OEIC before you do the move. Then you only pay one £25 transfer fee.
:rotfl:

But surely you the lose out of the sell/rebuy spread when the OIC gets to its new home?

WaltD

Froggitt wrote: »

But surely you the lose out of the sell/rebuy spread when the OIC gets to its new home?

There is no spread on OEICs. Only on Unit Trusts.

grey_gym_sock

bowlhead99 wrote: »

If I invest £100 in an OEIC or unit trust which makes £6 of income, and it costs £2 to run it for a year, it will only pay me £4 of income distribution at the end of the year. I'll pay tax on the four quid at an appropriate marginal rate. However if I then get a £1 kickback on my fees, I've successfully extracted a fiver of income out of the fund and should really have paid tax on it all, not just on the first £4.

the £1kickback either comes from income (and so should be taxed as income), or it's really capital (in which case you should knock £1 off your base cost of the fund for CGT purposes - which may or may not lead to you eventually paying more CGT).

you can argue about which of those ways of treating the £1 makes more sense. but the old system, in which the £1 escapes the tax net, as neither income nor capital, didn't make any sense.

bowlhead99

WaltD wrote: »

BTW, does anyone have any experience of Sippdeal as an ISA provider? They are one of the very few self-select, online providers who deal in both funds and exchange-traded securities.

I'm a Sippdeal customer, though not for an ISA ; I have a SIPP with them. Shouldn't make a difference to my comments as the charging structure is basically the same, I'm an investor not a pensioner.

Service has been absolutely fine, both setting up the account, operating it online and trading on phone occasionally. They have had some weekend downtime on their online platform but always advised in advance. The mobile app used to be a bit flaky but seems better of late and I have placed trades through it. The research tools on the website are maybe not as pretty as HL but I look at graphs and charts and the like on trustnet, morningstar, advfn, google finance etc so don't really need that as a service. As long as I can get a portfolio summary of what I hold now, what it cost and what the ins and outs of the cash account have been, all dump-able to excel, I'm happy.

I went with them as my regular broker (TD Direct) used the same underlying SIPP administrator (AJ Bell) but didn't have quite as good a fund offering at the time and also had an annual SIPP admin fee which you didn't get by going direct to SIPPdeal which was run by AJB themselves.

As it is, I ended up holding some funds which attract SIPPdeal's £12.50pq custody fee (not all do, you only pay it if you have one or more qualifying products) so I'm effectively paying an annual fee after all, while TD now have a wider set of funds available than they did (though TD now also have a percentage based platform fee for funds, so it's swings and roundabouts). For me that fee is not too high in the grand scheme of things though, as other providers will all charge you one way or another if you are holding clean funds.

Having mentioned TD Direct, my ISA has been with them for several years and I've had a normal trading account with them for longer. They waive their annual admin fee on the ISA if your balance is high enough at the end of each May, and the threshold for that is not too high (£5100, less than half the annual ISA subscription allowance), and they also waive it if you make regular monthly contributions. They charge for funds separately with a percentage based fee (.35%) - of course, whether that is better for you or not than paying an annual fixed 'custody fee' at somewhere like SIPPdeal depends on how much you actually have invested. On the face of it it's not as good as Charles Stanley Direct who only charge 0.25% on funds. But the fund choices do differ slightly once you get past the mainstream ones.

If you are looking at moving platforms it's worth taking a look at what exactly you hold and what you will hold in future and how often you will buy or sell. For example:

Aside from the annual (waivable) admin fee that applies to your whole ISA account, TD Direct charge nothing in terms of specific charges to hold shares/ITs/ETFs and can deal in a wide range of international stocks in your ISA (a wider range than most). I see them as more of a stockbroker who has started to offer a decent range of funds, rather than a fund platform that allows you to hold stocks (like HL), and most of what I have with TD is stocks (both in ISA and out). It seems bizarre that you would want to move your funds away from a fund platform like HL but keep your shares with them - paying an (admittedly, capped) annual fee for the privilege of using their (historically) non-core broking service.

TD offer highly discounted transaction fees for regular purchases in FTSE350 and a range of ET products. But Sippdeal have those discounted fees for those products and a range of popular ITs and funds. So that might swing it slightly towards Sippdeal, if you're dripfeeding ITs.

But wait a moment, I said Sippdeal have discounted transaction fees on monthly funding of certain funds ... yes that's right, they have transaction fees on buying funds, which TD, HL and several others don't have at all at the moment. They make their platform money off fund investors through transaction fees and the occasional custody fee for some investors, while TD make it by a percentage based charge on NAV of the funds instead.

The transaction fee on funds at Sippdeal is a bit annoying because if I find myself with say £200-300 in my account from some dividends or whatever I can't just park it into an exsiting fund right away, because it will cost me a tenner transaction fee which is crazy inefficient. I should just get the cheap regular investing facility turned on but haven't bothered so far as I'm mostly feeding my SIPP with lump sums.

So basically the point of this ramble is:

- different providers have different structures so know what you're getting into price wise for each part of your portfolio

- Sippdeal is fine, I would recommend them

- TD Direct is also fine, I would also recommend them, and they are certainly well set up for shares (particularly outside an ISA where you can have multicurrency cash accounts, deal with extended settlement etc)

Then again, maybe it's worth paying a little more for a professionally operated, reliable platform with excellent user support - which I have always found HL to be!

They do get a lot of good press for their customer service. They handle a lot of newbie investors, being the size they are. But it's horses for courses.

When buying a smart phone I would buy Android over Apple as I want the greater functionality, more performance per pound, and am willing to invest the time and effort to get around some user-unfriendliness rather than not have a particular feature at all, if I had gone with Apple. However, I would recommend Apple to my retired father. Out of the box it just works, the overpriced-ness is not going to worry him, and all the negatives to me like not being able to have a spare battery or a memory card or properly multitask two or three apps at once or configure a widget on your homescreen is a POSITIVE for him as there's less to go wrong. So I can tell him to buy iPhone without ever having been a customer.

I use Sippdeal and TDDirect for my own personal price / performance preferences but recommended HL to my Dad without ever having been a customer.

grey_gym_sock

if you move now to a provider whose new charging model hasn't been declared, i'd check that their exit fees aren't too high in case you want to move again.

i don't only say because i'm an HL shareholder. i may end up moving my own funds away from them, but i'm sitting tight for the next few months.

(or i might convert my funds to the nearest equivalent ETFs, and stick with HL. the possiblities are endless. i should get out more.)