High or low Fidelity? - RDR charges announced

SnowMan

This post is relevant to investors with existing dirty class fund holdings with Fidelity Fundsnetwork or Fidelity via Cavendish.

I suspect for example, there are a number of investors invested in the retail version of the HSBC trackers with Fidelity Fundsnetwork direct (or Fidelity via Cavendish). These retail classes are closed to new investment, but retail class holdings have arisen through purchases before February 2014, or regular premium mandates set up before February 2014. These HSBC retail classes have an OCF 0.1%pa higher than the clean share class, but there is no separate explicit platform charge and so investors are effectively paying a platform charge of 0.1%pa rather than 0.35%pa for the clean class (0.25%pa for Cavendish).

Of course this applies to all dirty class funds with Fidelity (I use the HSBC trackers as a relevant example). But clean share classes may be overall cheaper in the general case.

Fidelity Fundsnetwork have given some indications of how they will convert dirty share classes (such as the HSBC retail class trackers) to clean share classes (such as the C class), because of the requirement to do so by April 2016 at the latest.

Firstly note that the following press release relates to their adviser model. Effectively this is what those invested through Cavendish are under (although there is no separate £45 to pay via Cavendish). However it is hard to think it will be fundamentally different for DIY investors invested directly with Fidelity Fundsnetwork.

https://www.fidelity.co.uk/static/pdf/adviserservices/conversion-announcement.pdf

The relevant bit for those wanted to hold out in dirty classes as long as possible (because of the scenario indicated at the beginning).

With regards to implementing a total conversion of all remaining bundled assets on the platform (post the optional conversion opportunities but prior to April 2016) we’re currently working the details through with the FCA and other bodies.

However, for the reasons outlined already we do believe it will be appropriate to do this and be in the best interests of you and your clients. Importantly, we realise that you want as much time as possible to move your outstanding clients from commission to fees, and therefore we do not intend to undertake any mandatory conversion of clients’ assets before the latter part of 2015

Hooloovoo

Thanks for the update, SnowMan.

The key point for those of us with an existing MSP is do not change it if you want to keep investing in the existing dirty class funds.

It's possible to hold both the dirty and clean classes of funds at the same time. So if, for example, you have an MSP of £960 to fill a 2013/14 ISA subscription limit, you can keep your MSP at that level and then just "top up" to the new 2014/15 limit with clean class funds.

You'll then have both funds types on your account, until the conversion is forced.

mike88

Cavendish have promised us with an update nearer the 2016 conversion deadline. I'm just waiting for this advice before attempting to fully understand the implications.

SnowMan

I'm not a big fan of Fidelity's trackers because of their high tracking difference, at least on their UK all share tracker (relative to their OCF) but interesting to see they have cut the cost of their trackers.

https://www.fidelity.co.uk/mediacentre/details.page?whereParameter=consumer-press-releases/fidelity-worldwide-investment-cuts-index-tracker-charges

ChopperST

I've bitten the bullet snowman and opened the UK and US Acc trackers as its frustrating not being able to top up my existing funds without triggering a conversion if I amend my MSP or add in a lump sum. I intend to use them to rebalance quarterly. Fortunately my other dirty class funds are all within my accepted tolerances and do not need any amendments at the present time.

The Fidelity index funds are of relatively low value in relation to the HSBC dirty class and the lower management charge should (relatively speaking) offset the tracking error.

I've decided to stay with Fidelity till the end of the current tax year and reassess my options as my portfolio is still relatively small and I would like to let the dust settle prior to moving for the sake of 0.1%