Bundled/Unbundled charging.

talexuser

Considering changing my old style funds to clean class, now switching is free in Fundsnetwork.

In most cases if I take the bundled TER and subtract a trail rebate of 0.5% (Cavendish) it works out to exactly the same % figure as the TER of the clean class plus a 0.25% platform fee for Fundsnetwork/Cavendish.

However M&G Optimal Income class A Acc has a TER of 1.41% - 0.5% = 0.91%, whereas M&G Optimal Income class I Acc has a TER of 0.91% plus 0.25% = 1.16% so is more expensive. Have I got this right? if so some RDR improvement...

Rollinghome

That's right. Fundsnetwork were previously offering two bundled versions of that fund, class X with an AMC of 1.50% and class A with a lower AMC of 1.25%, you could take your pick.

Both had the same trail rebate but IIRC the class A had a theoretical initial charge that was waived and the class X had no initial charge but a backend charge that was also waived. HL only ever offered the higher priced class X version.

So if you've got the class A you'll be better to stick with it as long as you can rather than converting as the clean class I version seems to be based on the class X less all commissions. Obviously you won't be able to add to the class A version now.

The most obvious cases for sticking with the bundled versions are most trackers.

jabbahut40

Hi, On a related subject I notice that HL have been offering unbundled funds since last month. I have used their converter to check whether the AMC (inc any bonus's) is lower for unbundled funds (which is mostly the case but not always) however notice that these conversions won't be processed until June. Anyone know why HL are delaying these conversions and is there any advantage in converting now manually?


Thanks, Jabba

talexuser

Rolling, thanks for confirming that. Looks like I'll wait till the last deadline for automatic transfer if I've still got the fund by next year.

grey_gym_sock

jabbahut40 wrote: »

Hi, On a related subject I notice that HL have been offering unbundled funds since last month. I have used their converter to check whether the AMC (inc any bonus's) is lower for unbundled funds (which is mostly the case but not always) however notice that these conversions won't be processed until June. Anyone know why HL are delaying these conversions and is there any advantage in converting now manually?

allegedly, conversion is a complicated process, requiring co-operation with the fund management groups. though you might also note that inclusive funds are in many cases more profitable to HL, since they are retaining some of the commission on many funds.

if you switch manually now, you will be out of the market for 1 day (or possibly more); and you will pay an initial charge (if the fund has 1); and it will count as a disposal and new purchase for capital gains tax purposes (unless it's in an ISA or SIPP, where that doesn't apply).

on the other hand, loyalty bonus is now taxable (except in an ISA or SIPP), so you may be better off with an unbundled fund with a lower AMC and no (or much lower) loyalty bonus.

jabbahut40

grey_gym_sock wrote: »

allegedly, conversion is a complicated process, requiring co-operation with the fund management groups. though you might also note that inclusive funds are in many cases more profitable to HL, since they are retaining some of the commission on many funds.

if you switch manually now, you will be out of the market for 1 day (or possibly more); and you will pay an initial charge (if the fund has 1); and it will count as a disposal and new purchase for capital gains tax purposes (unless it's in an ISA or SIPP, where that doesn't apply).

on the other hand, loyalty bonus is now taxable (except in an ISA or SIPP), so you may be better off with an unbundled fund with a lower AMC and no (or much lower) loyalty bonus.

Thanks. All my funds are in a SIPP. I don't think HL have any initial charges for my funds so I see the key advantage of moving to unbundled funds now is to get the cheaper AMC sooner rather than wait until June?


If I wait until June conversion will I still be out of the market for a day(s) or is the conversion same day?


Thanks, Jabba

grey_gym_sock

if you wait for conversion in june, it will be the same day, i.e. you're not out of the market at all.

a SIPP (or ISA) simplifies it a bit (i.e. no tax considerations). if the unbundled AMC is less than the inclusive AMC minus loyalty bonus, then it might be worth switching now. otherwise, probably no point.

Rollinghome

jabbahut40 wrote: »

Thanks. All my funds are in a SIPP. I don't think HL have any initial charges for my funds so I see the key advantage of moving to unbundled funds now is to get the cheaper AMC sooner rather than wait until June?

If I wait until June conversion will I still be out of the market for a day(s) or is the conversion same day?

Thanks, Jabba

You should be able to switch without being out of the market if you're crafty.

If you ask for a switch and choose the option "By Value" you can switch up 90% of your holding by specifying the value you want to switch. Because you've specified the value the sell and buy should go through at exactly the same time. You can repeat the 90% switch either until you've only a few poundsworth unswitched, and then do a normal switch or sell those to cash. If you're switching several funds, you could do it in other ways involving simultaneous buys and sells.

Be careful not to use the 'By Units' option as then the Buy order won't be placed until after the units you're selling have been sold and the price known, normally a day later.

But unless you've very large sums invested in each fund the gain from 0.10% or so off a fund for 3 months will be fairly small. (You will of course have the great satisfaction of knowing you've stopped HL sneakily earning that extra commission from you as explained by GGS.)