Charles Stanley Direct - Initial Charge Misleading?

NordicNoir

I have just opened a CSD ISA and had done lots of research on funds and pricing, as I am totally new to investing.

I bought a Vanguard fund B59G489 and on the "Key Information" page on CSD it had the stated the Inital Charge as 0%. The KII document from Vanguard states a maximum charge of 0.50%.

When I was researching platforms I noticed that HL often discounted initial charges, so I assumed that the 0% stated by CSD meant that they had negotiated waving this charge as well.

I have now had the contract paperwork through and I have been charged the 0.50% inital charge even though the CSD page says that it has a 0% charge.

Have a made a newbie mistake interpreting the 0% initial charge on the CSD page or have CSD made a mistake?

I was about to take a little gamble on a fund today and notice that it has a 4.5% inital charge (eek!). HL state that they do not take this charge and CSD state the charge as 0% again... but I have a feeling that they will take the 4.50%.

I will of course query it with CSD, but I wanted to check here first in case I have missed something really obvious!

Many thanks!

ChopperST

From the fund fact sheet;

Charges

One-off charges taken before or after you invest
Entry charge 0.50%
Exit charge None
This is the maximum that might be taken out of your money before
it is invested and before the proceeds of your investment are paid
out.
Charges taken from the Fund over a year
Ongoing charges 0.15%
Charges taken from the Fund under specific conditions
Performance fee None

le_loup

Vanguard do have funds with a non-discountable initial charge.
i.e., no platform discounts it.

Rollinghome

A bit confusing as Vanguard call the 0.50% an "entry charge" rather than an initial charge and make the point that it's paid into the fund not to them. So essentially a dilution levy equal to stamp duty.

You'll also find that many funds are said to have no initial charge but still have a "spread". Nor for that matter does the TER/OCF include all costs. We've a long way to go until charges and the terms used are as clear as they should be.

westy22

It is not an Initial Charge as such - it is 0.50% Stamp Duty Reserve Tax (SDRT) that Vanguard themselves charge upfront on the UK Equity Index Funds. It is clearly stated on all Vanguard's literature and you would have to pay it regardless which platform you used to buy it.

NordicNoir

Thanks folks.... I tripped up on that one!

I still think that it is a bit naughty of CSD though, as the "Key Information" table does seem to lead you to assume there are no initial charges by stating that as 0%. They should take that field out of the table!

For instance, I was interested in this one B5NR927. On HL it shows that they waive the 4.5% initial charge. On CSD they show the initial charge as 0%. On the KII paperwork it states the charge as 4.5%. So, I would assume that there is no charge on either platform (because they both state so!), but I suspect that I would be charged it by CSD.

I have emailed them to clarify, but it is not very clear at all to me!

ColdIron

It's easy to get confused between the types of 'initial charges'

Dilution levies such as the 0.5% on the Vanguard fund cannot be avoided as they are taken by the funds managers themselves

Genuine initial charges such as that shown on the Investec fund used to be paid back to the platform/introducer as a form of commission and are pretty uncommon now, CSD hasn't ever charged for these I think. HL were one of the first to do away with them many years back but still insist on showing it as a saving, presumably to show themselves in the best possible light

Don't worry, CSD will not be charging you that 4.5%

NordicNoir

ColdIron wrote: »

Don't worry, CSD will not be charging you that 4.5%

Thanks ColdIron, they certainly do not make it easy for a newbie!

Everyones helpful comments makes me realise that a lot of this stuff you only pick up by experience (for instance knowing that Vanguard never have fee waivers) and you knowing that CSD will not charge the 4.5% for Investec. For me, the way that Vanguard and Investec are shown on the CSD site is the same.... so how would I, as an uninformed investor, know the difference?

I intend to stick mainly with passive index funds and Vanguard Lifestrategy funds..... I just had this urge to risk a little on the Investec one! Thanks for the clarification!

jimjames

I don't know about CS but HL are very clear on the charges

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-ftse-uk-equity-index-accumulation

Edit - just had a quick look on CSD website.

The doc for Vanguard does show the 0.5% entry fee, as an example I looked at an Aberdeen fund and that shows the fee as 0% so it does appear that the documents are correct and can be relied on as the right values. Website isn't showing the 0.5% for the Vanguard fund though which definitely does make it look confusing if you aren't checking the KIID document. Having said that you do normally have to tick a box that you've read it - I always tick and haven't always done so.

NordicNoir

jimjames wrote: »

I don't know about CS but HL are very clear on the charges

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-ftse-uk-equity-index-accumulation

jimjames - yep they are very clear, but sadly CSD are not clear at all. HL state the Net Initial Charge as 0.50% and CSD state that the Initial Charge is 0% (when it is 0.50% too).... hence my whinging!

It is a shame, as I wanted to go with HL but 0.45% compared to 0.25% platform fees put HL out of the running. Hopefully, once I get a little more experienced CSD will suit me fine.

I have however opened a SIPP with HL because they are cheaper than CSD (they have an annual SIPP fee) - so I get to play with both platforms!

bigadaj

Vanguard claim the dilution levy isn't actually a charge but tries to achieve a fair reflection of the costs incurred in investment, so discourages short termism and the costs of diving in and out of funds.

The ones I've looked at were generally 0.2-0.3% so that looks like a higher end charge.

There's no reason why you can't complain to Csd about that, you might get an apology and they can make it clearer, and they may make a one off payment of redress if it really is very opaque.