Genuine alternative to HL?

SnowMan

bowlhead99 wrote: »

If your provider or prospective provider says no changes until at least X, they will certainly feel they can change their prices once we get a month or so past X, so please be comfortable with exit fees that could be involved when, not if, the price change comes to pass. Of course the price changes in 2016 might be fine compared to what is out there at that point or what others are about to change to if they also haven't changed since 2013.

With ATS the exit fee is typically more than the annual platform charge (for example a £90 platform charge and for ISAs a £120 exit fee).

So if there is a 2 year guarantee of no charge increases, then it makes it impossible to know without the aid of a crystal ball, on what charging basis you are investing with them.

If there were no recourse to get exit fees waived on say a quadrupling of charges in 2 years time, that forced you to exit, then your true annual platform cost will be £150 per year (= 0.5 x (90 x 2)+ 120)) and not £90 per annum.

That is no basis on which to have a balanced contract between platform and investor. It makes it impossible to make an informed decision in comparing platforms. If you had to choose on this basis then you wouldn't know in advance whether over the next 2 years you are paying £90 pa or an amount 66% higher.

Of course ATS have done the right thing this time round (and are to be applauded for this) by waiving exit fees temporarily. But your erroneous argument seems to be that it would be OK for ATS not to waive exit fees in 2 years time on a further fee increase.

If for the purposes of argument we assume all other platforms only have a 30 day guarantee on charges, and typically exit fees are about the same as annual platform charges, and that exit fees aren't waived on a fee increase, then an investor only knows what their charges are to within a factor of 12. So you might be investing based on an effective charge of £20 per month or £240 per month. That is even greater nonsense.

It should be obvious that that it would be a nonsense system where exit fees were not waived on a fee increase. The general principle should be that exit fees are waived when subject to an arbitrary future fee increase.

bowlhead99

planteria wrote: »

to be honest, being unsure of getting a 'good deal' makes me reluctant to commit to investing as much as i, perhaps, could.

I suppose if the alternative is that - due to the evolving lay of the land, fees wise - you simply don't invest anywhere at all, you're probably "cutting your nose off to spite your face".

If you're worried that giving them an extra say 10k or 20k or whatever might be a 'bad deal' because it costs you half a percent in outrageous platform fees, so you just keep it in cash, you will still be a long way behind your optimal position when the markets go up by 10% and instead of having 9.5% net gains on your 20k, you just have 1.5% from being in cash.

Obviously there are risks with investing generally so you could be sitting pretty in cash if the market declines. And when assessing the risk/reward of investing, if your rewards are reduced by a large platform fee (whether the underlying returns for a year were initially profits or initially losses), there can be a point when investment flips over into not being worth doing, and you should pass.

But if you're reluctant to commit because you're fearful of high charges and have read that if the charge is x% and the amount invested for 20 years is y% then the compounding effect will cost you a crazy number like z thousand: remember that it is being paid out of those long-term investment returns that woudn't exist if you hadn't committed to invest in the first place.

I might have misinterpreted your post but if you haven't invested for fear of the game changing on you, you're probably doing yourself out of some returns. However, now we're within a month or so of the price changes being announced - it's not too long to wait, and it's probably not a great move to throw lots more cash in the pot if that cash will attract incremental exit fees when you want to move it to somewhere better in a month or two.

If you had say Fund A and Fund B in your portfolio, you could quite easily go ahead and buy a bit more Fund A - because there is no transaction fee to buy more of it and if you end up leaving, you were going to pay the Fund A transfer-out charge anyway. But if you didn't already have Fund C, it would be a different question buying some of that, as that would be an extra fee to transfer out in specie (or they might change the rules to make you pay a transaction fee to sell funds if you wanted to exit in cash).

Similarly with shares in individual Company Z, it's going to cost you 11.95 plus stamp duty to buy, which is wasted if you sell it again in a month or two when you dump HL as a provider, and if you don't sell it when you move you'll have to pay a transfer fee to take it with you.

Drp8713

Lokolo wrote: »

Charles Stanley Direct. 0,25% when using clean funds so when you switch it may be cheaper to go with them.

Just saw they charge £100 per annum for the SIPP.

That means im losing out if the fund remains under £5k. Which may be another year or so

Rollinghome

Drp8713 wrote: »

I have thought about this and cant see one for a small investor like me.

If your only putting a few thousand a year into funds, there is no fund dealing charge, no set up fee, no initial charge on most funds, no annual fee. Basically all your paying is a 1-2% TER for active funds and less for trackers, so maximum £20 per £1000 in charges.

I have looked at others and they have a £40 set up or £100 a year charge which dont compare

Hmm, I gulped at "all you're paying is".

For start, the costs of funds, both active and passive, will be somewhat higher than the quoted TER/OCF. That figure doesn't include various additional costs taken from the fund including the very important internal costs of trading such as broker fees, stamp duty, and spreads. Depending on the fund's turnover rate that could add a further 1% to costs, none of it included in the TER/OCF figure.

Set against this,you could also look at the risk premium, the premium you can expect to receive for accepting the risk of an investment over a non-risk asset. Robert Shiller, of Yale University calculated that the risk premium for equities averaged 2.45% over the period from 1881 to 2011. For other risk assets such as corporate bonds the premium will be less.

In other words, if your costs exceed 2.45% then any premium for risk may be wiped out completely. So if you expect some reward for risking your money then every fraction of a percent is vital.

Giving away your risk premium may make someone rich but it isn't likely to be you.

bowlhead99

SnowMan wrote: »

But your erroneous argument seems to be that it would be OK for ATS not to waive exit fees in 2 years time on a further fee increase.

I think you're misinterpreting what I said there, maybe the language used wasn't clear. I am trying to say that a fee increase may happen in 2 years, because if a provider is trying to sweeten a recent fee hike by saying today that "the market may move further but we will not change our prices again until some specific date", you can read between the lines that the provider may plan to change the fees on that specific date or shortly thereafter.

Then, if they are one of the providers that charge a relatively large exit fee for the type of holdings that you are considering putting with them, you would want to make sure you were intimately familiar with the structure of that charge and be prepared for them perhaps charging it to you if you were to leave. It is simple common sense.

I am not taking sides on a moral argument and saying it's OK, or it's not OK, for them to charge you their standard exit fees if the reason for you moving away is their fee hike rather than their competitors' fee reduction or relative service level.

But as you say:

SnowMan wrote: »

Of course ATS have done the right thing this time round (and are to be applauded for this) by waiving exit fees temporarily.

Effectively, you are praising them for something (waiving exit fees on a fee hike) that you feel should be completely standard and not at all special and therefore not at all deserving of praise. But you are giving them that praise, because it stands out as a consumer-friendly, righteous thing to do, and a company like theirs might not do it every time, and you have seen other companies not do it either (until put under media pressure or legal pressure or whatever).

Put another way, you're saying it's unusual for the fees to be waived because its unusual for a company to do a consumer-friendly thing without being prompted by their own marketing team of the moment, or the media, or the long arm of the law. I agree.

So basically I'm saying if a company is giving you some indication of a fee change due at a specific date, and the standard exit fees are not insignificant, make sure you're comfortable with them because companies' default approach will often be to try NOT to waive them in the first instance.

I agree with you that for companies that don't have a 'guaranteed no increase until x date' line in their marketing, and simply have 30 day or 90 day fee change clauses, that things are arguably even less certain.

But generally if the prices from all companies just went up during an industry shakeup, risking the loss of their customer base, it is common sense that most are unlikely to change their fees for the worse over the next little while, because they would lose credibility and cause more discomfort to their fragile customer base. If one of them actually comes out and says "hey guys my fees are staying here for a while, until at least X date", you can take it as just a little bit of marketing spin to assure their customers and prospective customers of something that was already common sense, rather than new real value being offered by that company differentiating itself through that statement.

But what it does do is imply the next date of their fee scale review and you should be looking at exit fees at that point and how they might affect you. Even if you don't think exit fees should affect you as a disaffected customer facing a fee rise, based on morality and/or the law, and/or the fact you have a template complaint letter ready to go that you used on another company in the past - you should surely not go into it blind if you are signing up to T&Cs with exit fees in them and you have an inkling when the menu of service charges might next change.

Does that cover it? :beer:

kidmugsy

I did wonder whether it might be attractive to use an Investment Trust ISA to avoid high charges, but only the Personal Assets Trust and Rothschild Investment Trust deals stood out. And the PAT one seems to be under reconsideration.

If you compare the figures with non-tax-sheltered IT investment schemes, I think you can see that it must cost a non-negligible sum to run an ISA.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats30Nov2013.pdf

For a smallish personal pension the JPM offering might be attractive (scroll down to p52).

kidmugsy

fimonkey wrote: »

what hope does a tiny investor like me, who prior to RDR was doing quite well and learning about S&S, but not well enough to cover the charges have? ?......£80pa when I was when I was with ii was more than my return p.a.

You could consider not using an ISA until you've accumulated a larger sum; just use a tax-exposed platform, or an IT investment scheme.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats30Nov2013.pdf

Then when you've accumulated £20k or more, swap to an ISA across a March and April. There's no point spending more on charges than you save in tax. (And remember that if you don't pay higher rate income tax you're not going to be saving income tax on equities in an ISA anyway.)

Drp8713

Rollinghome wrote: »

Hmm, I gulped at "all you're paying is".

For start, the costs of funds, both active and passive, will be somewhat higher than the quoted TER/OCF. That figure doesn't include various additional costs taken from the fund including the very important internal costs of trading such as broker fees, stamp duty, and spreads. Depending on the fund's turnover rate that could add a further 1% to costs, none of it included in the TER/OCF figure.

Set against this,you could also look at the risk premium, the premium you can expect to receive for accepting the risk of an investment over a non-risk asset. Robert Shiller, of Yale University calculated that the risk premium for equities averaged 2.45% over the period from 1881 to 2011. For other risk assets such as corporate bonds the premium will be less.

In other words, if your costs exceed 2.45% then any premium for risk may be wiped out completely. So if you expect some reward for risking your money then every fraction of a percent is vital.

Giving away your risk premium may make someone rich but it isn't likely to be you.

I am talking about fees forthe service, i would have the above fees with another provider too. Investment trusts are even more expensive with dealings fees, stamp duty and an ongoing 0.5%.

Ive look into statistics and calculating Alpha, but its pointless as i dont choose a fund by past peformance, i choose it based on the asset allocation thats most like the allocation i would choose of i was managing he fund

westy22

i choose it based on the asset allocation thats most like the allocation i would choose of i was managing he fund

I'm glad I don't do that otherwise my investments would be right down the toilet :rotfl:

jimjames

Drp8713 wrote: »

I am talking about fees forthe service, i would have the above fees with another provider too.

Comparing HL to others you wouldn't have those additional fees. HL rebate very little of the AMC, Cavendish rebate 0.5%. HL charge £2 per month for trackers with no maximum. Others such as Cavendish make no such flat rate charge.

Drp8713 wrote: »

Investment trusts are even more expensive with dealings fees, stamp duty and an ongoing 0.5%.

Some charges are more explicit but I'm not sure where you get the ongoing 0.5% from. With investment trust plans that I use you are charged 0.5% stamp duty initially but that's it. Some have minimal dealing fees which for a £50pm investment can be a matter of pence. Many IT saving schemes will be cheaper than HL is currently for small amounts especially in trackers.

There was a thread that compared all S&S ISA providers - I think Snowman had created it some time back so finding that may give some more info.