Clean or dirty funds

goodValue

A long time ago I bought a fund in which you didn't have to pay tax ( a PEP maybe?). I bought it direct from HSBC who have been sending me letters for the last year or so about converting to clean shares.
I have just received another letter saying that the fees for clean shares will be more than for the current dirty shares, implying that I could keep the dirty shares.
For those holding HSBC funds, what do you think of this proposed change?
Do the fees quoted by HSBC tell the whole story about how much the different funds will cost?

WobblyDog

goodValue wrote: »

For those holding HSBC funds, what do you think of this proposed change?

I've got some money held in a FTSE All-Share tracker ISA via HSBC, who I also have a current account with. I haven't paid too much attention to be honest, but I thought that retaining the dirty shares is no longer an option - they either get converted to clean shares, or I sell them. If I understand correctly, the new annual charge will be 0.42%, which is more than I was paying before, but not enough to make me do anything immediately.

goodValue

I've got some money held in a FTSE All-Share tracker ISA via HSBC

That looks very similar to the name of the fund that I have, though the fee looks larger than mine.
The letter didn't specifically talk about keeping dirty shares, but in a table it gave a date by which I had to contact them to retain the dirty shares.

dunstonh

For those holding HSBC funds, what do you think of this proposed change?

You have no choice in the matter. Platforms have to convert before April 2016. Off platform do not have to convert.

Do the fees quoted by HSBC tell the whole story about how much the different funds will cost?

In most cases, there is little difference but it is certainly more transparent. Some may pay more, some less. Mainly as the cross subsidy that used to exist the old way is being eroded. So, smaller investors can find themselves paying more whilst larger ones pay less.

WobblyDog

goodValue wrote: »

That looks very similar to the name of the fund that I have, though the fee looks larger than mine.
The letter didn't specifically talk about keeping dirty shares, but in a table it gave a date by which I had to contact them to retain the dirty shares.

Having checked my letter, you're right about the fee, my new Total Charge For Clean Shares is 0.32%, which apparently is more than I was paying before, but not enough for me to bother to look at other providers immediately.

goodValue

I too have checked my letter which I found verbose and ambiguous.
The part that made me think that dirty shares could be retained was a table with a column heading:
Transaction cut-off date (Date you must act by if you don't want the conversion to take place).
I obviously came to the wrong conclusion from this.

I'm afraid my next question shows my ignorance of the investment world - what is the difference between platform and off-platform; I thought that a platform was a company that built a web site that allowed people to buy and sell investment products that were not their own. So, I would have thought buying direct from HSBC would not be using a platform?

dunstonh

what is the difference between platform and off-platform;

Off platform is holding the investments directly and/or not on a platform.

on platform is holding the investments on a platform.

I thought that a platform was a company that built a web site that allowed people to buy and sell investment products that were not their own.

Correct. However, that is an extra layer and the regulator want it to be clear if you invest on platform then you are paying the platform for doing so. Holding assets off platform can be cheaper. Although in some cases, fund houses and product providers will offer cheaper versions of their funds/products via the platform. Also, it can be their own product and not others.

So, I would have thought buying direct from HSBC would not be using a platform?

Depends on whether you use the HSBC platform or not

goodValue

I bought the fund from HSBC (my bank account holder) over 25 years ago. I expect that there were no platforms then, so surely my fund must be off platform.

dunstonh

Platforms came out 13 years ago. However, its possible that at some point you were offered or you were forced on to a platform.

It is only platforms that are affected by the changes. Direct holdings are not.

goodValue

I bought the fund directly from HSBC, I don't recollect HSBC telling me about platforms, and I have never used a web site for this fund.
So I can't see how there is a platform linked with my investment.

dunstonh

goodValue wrote: »

I bought the fund directly from HSBC, I don't recollect HSBC telling me about platforms, and I have never used a web site for this fund.
So I can't see how there is a platform linked with my investment.

Whilst the changes were mandated on platforms only, this does not mean that the fund houses have to continue offering bundled charged funds. So, its possible that HSBC have decided to run with fewer share classes.

Who is your ISA manager? (full name, not just HSBC as they run separate companies for different distribution)