Inclusive vs Unbundled Funds

love2learn

Hi,

I'm invested in unbundled (clean class) funds at the moment as I switched to them a while back, meaning I have to make sure my ISA/SIPP etc have a sufficient cash balance to cover management charges which often means selling some shares in the funds to cover the management charges.

By doing that I frequently have to sell shares in the fund to cover the management charges. It's hard to work out whether it would be better to be invested in the equivalent inclusive (old style) funds and receive a loyalty bonus to counteract the cost of fund management to avoid me having to sell shares. Or to stay in the clean class funds and sell shares to cover the management charges.

I have significant funds invested over 6 accounts between my wife and I so topping them all up by card to cover the management charges is often not a practical option.

Obviously I'm not looking for advice. Just opinions?

Thanks :-)

westy22

I think you have burned your bridges as once you have converted to clean funds there is no going back to the old version with rebates AFAIK.

masonic

As westy says, you can't buy into inclusive funds any more.

Management fees are rolled up into the funds themselves. What you are being charged is a platform fee by your broker. Your options are to pay cash into the account (preferably the SIPP where you get tax relief, but certainly outside the ISA if possible) to cover the fees, you may be able to switch your units into income so that you receive dividends that cover your fees, or sell shares to cover them.

joerugby

At the moment we are still in inclusive funds which generate more than enough in loyalty rebates each month to pay HL's charges.

Most of our funds were acquired before last April and therefore the rebates can be used in this way.

However one fund which we re-purchased in May 2014 as part of a bed and isa transaction pays bonuses which can only be invested in new units, they cannot be used to pay fees. I find this irksome.

What is even more irksome is that I understand this restriction will, from a date in the not too distant future, apply to all rebates received. This will mean that we will either have to sell units each month to pay HL's charges or transfer about £80 each month into our HL accounts to cover charges.

I understand that this was a requirement of the RDR. Can anyone explain how this is likely to benefit me as an investor?

masonic

joerugby wrote: »

I understand that this was a requirement of the RDR. Can anyone explain how this is likely to benefit me as an investor?

Well it might encourage you to move somewhere cheaper for starters.

joerugby

masonic wrote: »

Well it might encourage you to move somewhere cheaper for starters.

I looked at cheaper options last year and seriously considered Interactive Investor. I decided to follow my instincts regarding quality of service and stay put and I'm happy with that decision.

masonic

joerugby wrote: »

I looked at cheaper options last year and seriously considered Interactive Investor. I decided to follow my instincts regarding quality of service and stay put and I'm happy with that decision.

Perhaps you could suggest HL further improve its quality of service by collecting payments automatically by debit card or direct debit when there isn't enough cash on the account, like some other inferior platforms do.

Chickereeeee

Or move to iWeb with no recurring platform charges - problem solved.

joerugby

masonic wrote: »

Perhaps you could suggest HL further improve its quality of service by collecting payments automatically by debit card or direct debit when there isn't enough cash on the account, like some other inferior platforms do.

Is it too much to ask that charges continue to be offset against rebates?

masonic

joerugby wrote: »

Is it too much to ask that charges continue to be offset against rebates?

Well there won't be any rebates on dirty class funds when those fund classes disappear, so the only rebates you'll receive are those special negotiated discounts on certain funds, which are unlikely to make much of a dent in your charges anyway.

Vortigern

masonic wrote: »

you may be able to switch your units into income so that you receive dividends that cover your fees

That's what I did. Opt for income to be held in the account. Fees are taken from that income and any excess, over HL's suggested minimum, is re-invested manually.