Big mistake with ISA. How do I sort out this mess?

brewerdave

The final stage of subscribing to the likes of HL by debit card is normally a Mastercard Secure or Verified by Visa screen -presumably you must have completed this successfully for M & G??

Damage

Interestingly it never got to the verification part of the debit card transaction (Visa Debit in my case), which was one of the reasons why I presumed nothing had happened.

However, I did get the verification screen when I subsequently set up my ISA with Hargreaves Lansdown, as expected.

I have just spoken to M&G and they were apologetic and are looking into it for me. They have asked me to put it in writing and send it to them as well, which is a damned nuisance, so I'll be doing that shortly.


EDIT:

I also phoned Hargreaves Lansdown to see if any of this was going to prove problematic for my ISA that I subsequently set up with them, and they said that they were pretty certain that HMRC would request that the second ISA that was set up (with HL) is to be cancelled, which is precisely what I don't want to do. They added that they offer a 14-day cancellation period, so it might be worth asking if M&G offered the same.

So, I phoned M&G again, to see if they offered a cancellation period and they said they don't because I am dealing direct with an investment company, so that option is out. I have told them that I want to cancel with them whatever happens. If I subsequently have to have my HL-based ISA cancelled as well, then so be it, but I'll go straight back there immediately afterwards and re-do it.

My only worry was that the M&G problem might cause me to lose my ISA entitlement for this financial year, but the person on the phone implied that it would be unlikely due to the nature of the problem.

Now I've got to write this damned letter to them. I'll report back with anything else relevant in case this saga turns out to be of help to anyone else in the future. Although I usually experience problems that no one else in the history of mankind has ever encountered, I doubt I'm the only person who has been (or will be) in this situation.

jamesd

Before you do anything, phone the HMRC ISA helpline and ask them for their advice.

Since HL has a 14 day cancellation period I think that this is what they may suggest you do:

1. Cancel the HL one if necessary. However, if you have not yet paid anything into the HL ISA you do not need to do this. This is because an ISA manager can only open an ISA if they have BOTH a completed application and a subscription of money. Guidance notes for ISA managers, 5.2 page 46. So no money paid in, the application is still valid and HL can open the account when they receive the transfer from M&G. But HL may want you to cancel and use a transfer application instead, if so, just do what they say.

2. Complete the M&G one then use an ISA transfer to transfer it all to HL, closing the M&G account.

HL offer phone transfers so you can just tell them that this is what you want to do and they can send the transfer request to M&G for you and open the HL account when they get the money.

The transfer of everything from M&G to HL means you still have only one active S&S ISA with money from this year so you're within the rules.

But do check with HMRC first in case they suggest something else.

Vortigern

Given that HL offer a right to cancel, and M&G don't, you could:

• Cancel current application with HL
• Allow the M&G transaction to complete, then
• Transfer all from M&G to a new ISA with HL

HL are always trying to entice people to switch to them and may offer some sort of bonus, or help with switching charges. Check their website and see if they have any current offers.

ETA: jamesd types quicker than me!

jamesd

Redux got in before either of us, I just provided more supporting information.

Damage

Thank you JamesD and Vortigern.

The situation is that payment has left my account for both ISAs, so two payments of £15,240, one each to HL and M&G. I'll have a word with the HMRC ISA helpline as suggested, to see what they have to say.

I'm fine with following the suggestions about transferring to HL, if that turns out to be the best way. The only possible problem is that the two ISAs I have chosen are different, so I'm not sure which one I ought to hold on to. If the M&G one is likely to be the best choice after all, then I can transfer that across as it is. If my subsequent choice at HL is a better one (and I'm not really sure as I'm only a novice at this), then the M&G one ought to be cancelled completely so I can re-do my choice at HL.

If anyone with more experience of this than me (which is probably everyone) has any opinions as to which of my Stocks and Shares ISA choices is the best one, then I would be grateful to hear. My two ISAs at the moment are as follows:

M&G (the one I want to cancel, as things stand at the moment): 'Stocks and Shares Component; Index Tracker Fund; Sterling Class A Income Shares.' Here is a link to it: http://www.mandg.co.uk/investor/funds/index-tracker-fund/gb0031110843/overview/

HL (the one I set up after the website system apparently failed at M&G): 'HL Vantage Stocks and Shares ISA'. I chose this from the Medium Risk section of their Master Portfolios page, and it comprises the following:

Artemis Strategis Assets
CF Woodford Equity Income
Lindsell Train Global Equity
Newton Real Return
Old Mutual UK Alpha

I can't seem to link to it directly, but it's under 'Medium Risk' and I entered £15,240 as the amount, then it came up with the above suggestion. I must say that I'm impressed with this: I've only had it a couple of days and I've already lost £104.04!

Here's the HL Master Portfolios page: http://www.hl.co.uk/funds/master-portfolios

Incidentally, my intended portfolio will be for growth and for perhaps 10 - 15 years and possibly a bit longer. I'm not a great risk-taker, but I don't mind a high risk element to my eventual portfolio, so perhaps 5% or so high(ish) risk.

Thanks very much.

jamesd

Since you paid HL and they have the money they probably have opened the account so you're going to have to use their cancellation route, then transfer.

Damage

Okay, thank you. I'll sort it out and report back with how I got on.

jamesd

The change in value that you've seen is trivial and nothing to worry about. Easy for me to say that having seen far worse but if you're new to investing it can be worrying until yo get used to it.

The M&G fund is a tracker fund for the UK FTSE All Share Index. A completely routine product but a global tracker would probably be a better idea. Not required, just a thought.

The HL fund choice is a mixture of funds with capable managers and good reputations. There is nothing to be concerned about in the choices given your risk specification and timeline, though if you are paying a charge on top of the fund charges for using the portfolio service you may want to just buy the funds directly.

The two sets have different investing styles, the tracker is passive, the HL selection is actively managed. Huge amounts of discussion of the relative merits of the two approaches and personally I use both depending on where I'm investing and what I'm trying to achieve.

HL can probably handle everything that is needed with one phone call from you - one part to get the cancel done, another to initiate a new transfer and replacement account opening. But they might need a time gap for their systems to update to show the first part before they can do the second.

Damage

Thanks again; this is all new to me, but I have been reading a lot over the last few days and things are beginning to make sense. I didn't know about the option to buy the funds directly, so perhaps I ought to take the opportunity to cancel and start again.

I'm okay with the fluctuations in value and understand what can happen. Hopefully the long-term trend will be upwards!

I am still working out a likely 'framework' (for want of a more suitable term) for my intended portfolio, but I am reading up on it. I am beginning to understand the different types of shares and what determines their risk level. I'm also reading up on funds and investments trusts, and am beginning to understand their particular characteristics. I just need to work out a ratio for the shares component of my portfolio to the fund/fund-alternative component. When I have read a bit more and have a better understanding, perhaps I could post back on the forum with a suggested portfolio 'framework', detailing categories and types of investment, then hopefully someone might have some suggestions as to sensible percentages of my total investment to go to each category and sub-category.