My head hurts post RDR - need help

Freefall123

I currently have a SIPP and an ISA with Hargreaves Lansdown and reading through this forum is getting me more and more confused as to what to do about moving or stopping with them. Snowmans spreedsheet is very informative but the more I look the more I get confused.

I would appreciate any advice on what to do, below are my details

SIPP

Contains 18 funds , approx £105,000 with monthly contributions of £340 divided into 6 funds.
One of the funds is the Vanguard Lifestrategy 80% worth £13000 which I would like to keep and add to but the charge at HL is going to be high.

Also 1 Investment trust value £3500

ISA

14 funds, value £53,000, with monthly contributions of £300 across 6 funds

Plus

2 Investment trusts, value £10,000, (would like to add more trusts)
1 ETF tracker, value £7000

I am currently thinking of keeping my SIPP with HL and selling the Vanguard fund and putting that money into the remaining funds.

Either leaving the existing ISA with HL and opening a new ISA in the next tax year and buying the Vanguard Lifestrategy fund there along with my monthly purchases

or transferring my ISA from HL to another provider and continuing on from there.

Any thoughts or help appreciated

dunstonh

Contains 18 funds , approx £105,000 with monthly contributions of £340 divided into 6 funds.

18 funds on £105k is a bit overkill. I would personally look more to 7-8.

One of the funds is the Vanguard Lifestrategy 80% worth £13000 which I would like to keep and add to but the charge at HL is going to be high.

One of the reasons to use multi-asset funds is that they provide in house diversification using models built to achieve a certain objective. Using it with other funds breaks that objective. If the others are multi-asset funds then that is ok as that would be equivalent to using multiple investment strategies and hedging your bets. However, if they are single sector funds then what research and reasoning are you use to break the asset model that has been professionally built?

Another reason to use Vanguard is that there is no fund management involved. However, with 17 other funds on that pot, you are bringing fund management into if with you being the effective fund manager. If you are doing that then you may as well use single sector funds and not multi-asset funds.

14 funds, value £53,000, with monthly contributions of £300 across 6 funds

Again, massive overkill on the number of funds.

SnowMan

Freefall, the obvious choice would be to switch everything to Interactive Investor (II).

At the moment if you stay with HL you are looking at platform charges of around £800pa.

With II you would have custody charges of around £144pa. The regular investing costs you £1.50 a time I think at II, so £18 per year x 6 monthly mandates = £108pa. So total platform costs with II are around £232pa (144 + 108) + one off dealing costs at £10 per buy or sale for funds or shares and ETFs.

You can take advantage of II's offer to help with exit costs

If you transfer before 2nd June the transfer cost of re-registering your SIPP portfolio to II is £75. After 2nd June the cost to re-register just your SIPP goes up to around £500, so don't dither.

You might want to consolidate your ISA funds into a single fund or a few funds if you are moving those over to II to reduce exit fees, you might want to run with larger holdings in fewer funds at II also and so this would be a good time to think about that.

If you think that the sextupling of the exit fees is unfair and trapping you into HL, then send an email to HL asking them to waive your exit fees on moving to II on the grounds it is a unilateral change to your terms and conditions (which is trapping you into their fee structure hence why you are exiting). When they refuse to waive exit fees, refer your complaint to the FOS see this thread. You have a good chance of success.

Good to hear you found the spreadsheet useful. An updated version of that can be downloaded from

https://drive.google.com/file/d/0BxA6Przq6KI1VWxwR3JDdUFiNU0/edit?usp=sharing

Freefall123

Thanks Snowman, that's more the guidance I was after. You don't think its worth keeping the SIPP at HL with funds only and moving the ISA to II ?

Thanks for the reply Dunston, but I was wanting more guidance re charges and moving than my fund allocations or investment strategy, its performance has done me well for the last few years and I've read Woodfords comments on diworsification

SnowMan

Freefall123 wrote: »

Thanks Snowman, that's more the guidance I was after. You don't think its worth keeping the SIPP at HL with funds only and moving the ISA to II ?

That looks a costly option. The HL charges on the SIPP alone would be in the region of £500pa. Whereas you are looking at £144pa at interactive investor for holding the funds in a SIPP there (plus your monthly contribution costs).

You also incur the £80pa II ISA charge if you just have your ISA there and not the SIPP, albeit you may get that back in free trades.

But it would take a lot of £10 dealing charges to eradicate that difference.

And if you did decide to keep the SIPP with HL and exit subsequently then you have six times the height of barbed to escape (approx £500 exit fee vs £75).

Mattygroves2

Read the small print about II dealing fees - the regular dealing option does not cover funds so every trade will cost you £10. If you do 12 a month for both ISA and SIPP then that is a lot of money even with 8 free a year. You would probably be better off with iWeb who only charge £5 a trade and no holding fee or even Share Centre who charge £1 a trade for small regular investments. With that number of trades a platform fee with free fund trades could well be cheaper and this may be a rare case where HL is actually the best option. Do the sums properly based on your trading patterns.

SnowMan

Mattygroves2 wrote: »

Read the small print about II dealing fees - the regular dealing option does not cover funds so every trade will cost you £10. If you do 12 a month for both ISA and SIPP then that is a lot of money even with 8 free a year. You would probably be better off with iWeb who only charge £5 a trade and no holding fee or even Share Centre who charge £1 a trade for small regular investments. With that number of trades a platform fee with free fund trades could well be cheaper and this may be a rare case where HL is actually the best option. Do the sums properly based on your trading patterns.

Looking it up you are right it doesn't cover regular regular investing into funds

http://www.iii.co.uk/our-services/regular-investing

So freefall would have to adapt his/her strategy, for example just making (say) 6 one off contributions a year alternately into each fund.

If you are too rigid with your strategy then you end up with only high cost options. Over time the cost of those extra charges add up.

Trustnet would be worth a look also if regular investing was a must have. They will have £2 per month per fund regular investing (waived for the first year for first 4 regular contributions) and the SIPP account charge of £144pa is waived for the first year). So £200pa in year 1 and £344pa in year 2 + dealing and regular investing costs.

planteria

agreed. i think that we all need to look at tailoring out habits to keeping the costs down:)

Freefall123

Thanks to all.

I control the monthly contributions to the ISA, so I could choose to trade less often. The SIPP monthly contributions are by my employer, I guess I could get it paid into a cash account at II and trade less often.

I always thought drip feeding was the way to go, and it allowed me to set a forget it for the year. Oh well, more work ho hum.