Sippdeal shocker (& link to template complaint letter)

dunstonh

I'm not an expert on how these charges are formulated, but if HM Gov really believed that the RDR was going to drive the cost of investing someone somewhere got it very wrong.

It wasnt the Govt that set the RDR. Indeed, the Govt had concerns over parts of the RDR but the FSA famously stuck its fingers up at the Treasury Select Committee.

At the moment, RDR does seem to be increasing costs for some and reducing for others.

Thrugelmir

dunstonh wrote: »

At the moment, RDR does seem to be increasing costs for some and reducing for others.

At least it's providing transparency. There's no doubt that there's a raft of hidden charges within the way investment managers etc work. I would guess that kick backs for utilisation of services outside the funds are fairly common.

grey_gym_sock

i suspect that sippdeal will still look pretty competitive when all providers do finally declare their pricing.

can't be too surprised at the SIPP custody charge, as AFAIK they were the only SIPP provider without some kind of fixed/minimum annual charge.

1 alternative to paying the 0.2% fund charge is to switch to ETFs - if there are equivalent ETFs for your funds. (this trick may work with some other providers, too.)

westy22

I note that the maximum annual charge on Youinvest for a SIPP will be £300 pa (£100 platform charge plus ceiling of £200 fund charges). Of course, individual dealing fees for funds or shares will be an additional cost (£4.95 / £9.95 / £1.50).

This seems quite reasonable if you have a large SIPP with lots of different funds, ITs, ETFs, shares etc. In my case it would represent about 0.1% pa whereas I believe people are expecting charges in excess of 0.4% when HL announces its proposals

bowlhead99

My SIPP with them is pretty diversified too - I won't hit the ceiling on the platform/custody fee.

So it looks like they'll continue to have you pay the execution-only stockbroking for shares and ETFs and ITs through the 9.95 dealing costs, and have you pay for the fund platform through 4.95 dealing costs and an annual percentage fee. If you have a large amount on platform across a number of funds and they run an account for you for a year in which you don't trade, they need to get money from somewhere.

If you were just starting out with an ISA or SIPP with say £10k in two or three clean funds or trackers, you'd only be paying £20 a year for them to provide you a platform, dealing system and reporting/ admin. This doesn't seem unreasonable - there is clearly a minimum level of work for them, systems and infrastructure and compliance and HMRC reporting and customer service staffing etc which stops them giving you this administration for free even though all providers would prefer to say 'no ISA admin fee'.

It is surely the spirit of RDR to show you that what you want doing costs money and who receives that money. So a baseline annual fee plus transactional charges when you want to buy or sell your fund positions (£4.95 or £1.50 on the monthly purchase program) does not seem ridiculous. If TD Direct or Charles Stanley want to continue with zero transaction charges but 0.25% or 0.35% for the platform fee instead of 0.20% at Sippdeal/Youinvest, that's also a reasonable way of doing it and perhaps different types of customers will gravitate to one or the other.

The share dealing at £9.95 is not uncompetitive compared to the rest of the market, particularly when the £1.50 for regular monthly dealing extends to a range of ITs and ETFs in addition to FTSE350 ; most other brokers restrict it to FTSE 100 or FTSE 350 shares only.

Disappointing that I'll be paying a SIPP admin fee overlaid on top of the above, but as grey gym sock says, everyone else has one. There's obviously incremental work in setting up and administering a SIPP product versus unwrapped trading (claiming back income tax on your contributions and withholdings tax on bond interest etc, HMRC compliance and so on).

If your SIPP was just shares/trusts and you weren't actively trading, they would still be handling the dividends and corporate actions and making the company documentation available to you and handling your voting etc, this has to be funded somehow if the fees for actually buying the shares in the first place are not massive.

At the end of the day, as well as having more compliance to administer, SIPPs are considered more of a niche product compared to ISAs (i.e. other pension alternatives such as personal or company personal or company defined benefit schemes do exist, while everyone wanting an ISA is shopping in the same marketplace). So for broadest appeal I can see why they don't charge an annual fee for the ISA wrapper and they do charge an annual fee for the SIPP wrapper. The charges for services relating to the underlying investments (funds or shares) are consistent between their SIPP, ISA and unwrapped accounts.

Bottom line, the changes are not big enough and charges not high enough to make me want to move away. Yet. Clearly if the other providers move to models that are much cheaper, to offset the hassle of moving 30+ positions, I would look at doing that. But I have until March before the transfer-out-charge per position increases by a fiver so am not in a rush. Probably with over £500 of exit charges I would struggle to find a platform willing to cover all of that on my transfer in, but would need to consider the likely lifetime costs of staying where I am versus jumping ship. Quality of service and ease of use is also a consideration when weighing up charges and both have been fine for me to date.

Eric_the_half_a_bee

Many of the charging structures out there have seemed unfeasibly cheap for clean/tracker fund classes, and it may well be that the provision of these funds has been cross-subsidised by fully loaded 1.5% funds, even where a portion of that 1.5% is rebated.

My guess is that AJ Bell is simply the first to break cover, and that many other providers will announce comparable new charging structures over the coming weeks. It may make sense to let the dust settle before deciding which way to go

Edit: Comment from "The Accumulator" on the Monevator website:

"The bulk of brokers have still to choose their model. Hardly anyone in the platform industry is talking about flat fee. It’s taken as read that % charging is the only way they’ll make a profit. It will be very interesting to see if ATS and iii can hold on. This has got at least another year to play out"

dtaylor84

As far as I can tell, for my single-fund (VLS) SIPP, I'm going from paying a £12.50 custody fee per quarter, with free regular investments (so £50/yr fixed), to paying:

£25/qtr admin charge
0.20%/yr fund charge
£1.50/month regular investment dealing charge

Or £118 + 0.2% /yr:

from £158/yr for £20k
to £318/yr for £100k (or more)

...which is quite an eye-watering jump to more than three times the current cost (or over six times the current cost for a pot of £100k).

pip895

I notice HL have just started advising you to keep minimum cash balances in your accounts - up to £250. I guess we wont have long to wait before their charges are announced

Marazan

I think charging you a fund dealing charge on top of a custody charge is pretty poor given that there's already RDR compliant brokers out there who are free for fund dealing and only charge custody.

JohnRo

The financial sector as a whole needs to clean up it's image big time, I know what they say about the road to hell but RDR goes some distance down such a road imho and the integrity it seems to be aiming for is desirable but obviously comes at a price.

I'm surprised the likes of Blackrock, Vanguard, et al haven't moved to take a slice of the retail online investment portal market. Perhaps they think it will just add costs and little else but I'm sure they'd find a market if the prices charged were inviting.