rplan discounts fees to 0.25% p.a.

waiax73

I got this email earlier today - if I understand this correctly, anyone who becomes a client of rplan before 10/03/2014 will get lower pricing (25bps rather than 35) on clean shareclasses which I think is as cheap as it gets.

I've been a client since previous tax year so I fall under the lower fee anyway, but maybe some of you will find this useful. 50 quid min. lump sum deal or transfer investments held elsewhere - seem like a quite easy way to secure the rate. Same price as Cavendish if you think about it.


direct link

HTH

talexuser

Problem is Cavendish is by no means the cheapest anymore if you have anything larger than a small portfolio. The fixed price platforms like iweb and iii can work out MUCH cheaper than the % guys.

waiax73

could you be a bit more specific? How much would one have to invest into a fixed fee model to be better off? Are there any other charges to consider?

According to their charges comparison, you would be worse off with III almost every time .

Edit: and I just noticed that the comparison I linked to is against rplan fee of 35bps not the discounted 25bps...

talexuser

I do not see how they have worked out their comparison, unless it is wrong. If you select Interactive investor and choose 8 trades a year they add £1600 as dealing charges. With iii you get 2 trades a quarter free, which is actually 8 trades a year! Furthermore if you delve into how they have worked out the charges, their own charges have assumed clean funds ~0.75%, whereas the same funds in Interactive Investor they have assumed dirty funds at ~1.5% charges, this is just bulls**t. It seems to me that some of the other platforms in this comparison have grounds for misleading advertising claims against rplan.

Take a total fund of £200,000 in funds only.

Cavendish at 0.25% will cost you £500 a year.

iWeb will cost you £10 a year with a £25 joining fee and £5 buy/sell fee.

iii will cost you £80 a year with 8 trades free.

The only disadvantage with these last 2 is a re-registration fee of £100-125, but as long as they stayed this competitive there should be no reason to leave.

grizzly1911

talexuser wrote: »

I

Take a total fund of £200,000 in funds only.

Cavendish at 0.25% will cost you £500 a year.

iWeb will cost you £10 a year with a £25 joining fee and £5 buy/sell fee.

iii will cost you £80 a year with 8 trades free.

The only disadvantage with these last 2 is a re-registration fee of £100-125, but as long as they stayed this competitive there should be no reason to leave.

Interesting that there is such a large differential as you move to larger fund size.

Will be interesting to see which providers blink first.

Do you use either of the cheap ones you mention? What is the service like? What limitations do they have?

Any exit fees?

waiax73

Sorry but this doesn't make sense.

£1600 in dealing charges for iii? Nothing even close to that when looking at the max - £150k invested for 10 years with 10 rebalances a year.

Also, I don't see any "misleading advertising" here - it seems that the methodology for the research is quite clear (note that other provider charges are calculated with clean shareclasses). It is also clear from that comparison that III is cheaper in some scenarios (just as other providers included).

Quote from their description of III pricing:
"Interactive Investor have a £10 dealing charge, plus a £20 quarterly fee which includes 2 trades. They rebate all of the ongoing commission on 'unbundled' share class funds, and some of the platform charges."

just checked this with III website (source) and it is also correct.

No bu**sh*t here, IMO

talexuser

waiax73 wrote: »

£1600 in dealing charges for iii? Nothing even close to that when looking at the max - £150k invested for 10 years with 10 rebalances a year.

Take your example the max of 150k lump for 10 years with 10 trades a year and the dealing cost shown for iii is £900 when the actual trades charged are 2 a year on top of the free 8, at £10 each ie total £200, so that is false.

For my original example with the default (as the page comes up) of 11520 invested every year for 10 years with (select) 8 changes a year the calculator gives you £1600 dealing costs for iii when they are actually free. So that figure is shown in that example and is false.

Click on detailed breakdown and the rplan funds used are clean classes @ ~0.75% fees. Scroll down to iii and the same example funds are bundled class @ ~ 1.5% each fees.

waiax73

talexuser wrote: »

Take your example the max of 150k lump for 10 years with 10 trades a year and the dealing cost shown for iii is £900 when the actual trades charged are 2 a year on top of the free 8, at £10 each ie total £200, so that is false.

For my original example with the default (as the page comes up) of 11520 invested every year for 10 years with (select) 8 changes a year the calculator gives you £1600 dealing costs for iii when they are actually free. So that figure is shown in that example and is false.

Click on detailed breakdown and the rplan funds used are clean classes @ ~0.75% fees. Scroll down to iii and the same example funds are bundled class @ ~ 1.5% each fees.

Thanks - I've just sent them an email about this to understand how this is worked out. Will post an update.

talexuser

grizzly1911 wrote: »

Interesting that there is such a large differential as you move to larger fund size.

Will be interesting to see which providers blink first.

Do you use either of the cheap ones you mention? What is the service like? What limitations do they have?

Any exit fees?

I'm having everything transferred into Cavendish/Fidelity from CoFunds and will see how things are after April when I put another allowance in. Your "blink" analogy is apposite, if Fidelity/Cavendish wish to retain their competitive position I think they will have to introduce a cap on fees, if they don't it is a signal they might be interested only in targeting many customers with smaller portfolios where the difference does not matter so much. The free switching does not sway me because I tend to hold (hopefully but so far historically) good funds for long periods so would not spend that much on switching (Buffet method).

Last time I looked iWeb (the cheapest at the moment for funds) had an exit fee of £125 and iii £120, but these are tending to being tweaked so you have to check the latest T&Cs all the time.

As far as service is concerned I don't really have any, as long as the website works and I get my statements that's ok. The accumulation of rebates and lower charges over many years is more important to me after seeing how moving to rebates etc from high cost providers in the early years has paid off each year.

waiax73

talexuser wrote: »

Take your example the max of 150k lump for 10 years with 10 trades a year and the dealing cost shown for iii is £900 when the actual trades charged are 2 a year on top of the free 8, at £10 each ie total £200, so that is false.

For my original example with the default (as the page comes up) of 11520 invested every year for 10 years with (select) 8 changes a year the calculator gives you £1600 dealing costs for iii when they are actually free. So that figure is shown in that example and is false.

Click on detailed breakdown and the rplan funds used are clean classes @ ~0.75% fees. Scroll down to iii and the same example funds are bundled class @ ~ 1.5% each fees.

Got a response already (a little over 2hrs - quite impressed!)

"Thanks for your email with questions regarding the charges comparison. I'll try to answer your questions in order.

With regards to the charges for Interactive Investor (iii) - first of all, we have indeed used the older 'implicit' share classes for the comparison, however iii do rebate 100% of the trail on those funds, which we do take into account for the calculation (except for the M&G Property Portfolio fund, on which they don't offer any rebate). They don't however rebate 100% of the platform charge back; they rebate some, but not all of the platform charge (which is around 0.25% for most of the funds in the comparison). Overall, according to our calculations they keep 0.269% on average out of the 0.75% available for trail commission and the platform charge on most funds used in the comparison.

iii now have some of the newer 'explicit' (aka unbundled) share classes available, but not for all funds we use in the comparison. Please note those funds weren't selected by us - they were picked by Moira O'Neill, the personal finance editor of Investors Chronicle.

It's also true that they offer 2 free deals per quarter. However, in the calculation we consider rebalancing rather than trading. Rebalancing typically takes place on the entire portfolio at the time - it's hard to rebalance e.g. 2 funds in the first quarter, another 2 funds in the next quarter, etc. As a result, the calculation assumes that all trades for rebalancing happen in the same quarter, and as a result only 2 free trades are taken into account for iii (rather than 8). I have attached a spreadsheet which shows the calculation for iii for a £100,000 lump sum investment over 10 years, assuming rebalancing the full portfolio each year - this shows the breakdown of the calculation on a year-by-year basis, which I hope will be helpful.

To your point on percentage versus flat trading fees - you are right that for larger amounts, it is often cheaper to pay a flat fee than a percentage-based fee. This is exactly what the comparison tool aims to show - it is meant for investors to work out which platform will work out cheapest for them based on their investments. For some investors, a percentage fee is cheaper, and for others a flat fee will be cheaper. However, our view is that it is usually more important to make the right investment decisions than to save on fees - if you make a mistake in your investment strategy, it could cost a lot more than a £10 dealing charge. As a result, we sometimes worry that dealing charges are a barrier for people doing things which are good investment practice such as rebalancing, as they try to save on dealing fees.

Finally - as you noted, the comparison table doesn't take the discounted 0.25% offer into account, just the standard 0.35% rate. rplan doesn't aim to be the cheapest provider; indeed, some of the providers in the table are cheaper than us. We do aim to offer good value though - we think a combination of sophisticated, advanced and helpful tools with a competitive price will be more attractive to most investors than a rock-bottom price with a bare minimum of tools.

I hope that this helps - please feel free to get in touch if you have any further questions."

Let me know if you want to see the spreadsheet - I'll figure out a way of posting this here.


To summarise - no misleading advertising in here. They just follow the same, logical method for all providers and they are more than comfortable with defending it.

talexuser

"For my original example with the default (as the page comes up) of 11520 invested every year for 10 years with (select) 8 changes a year the calculator gives you £1600 dealing costs for iii when they are actually free. So that figure is shown in that example and is false."

He says in the mail they ignore switches after the first free 2 assuming all switches take place at the same time of year. If this was the case then the further 6 paid for switches in the above example would be £60 a year, over 10 years would be £600 and NOT the £1600 that comes up in their comparison table, so it remains false and misleading.