Reducing platform cost - Stocks & Shares ISA with Hargreaves Lansdown

NickHStamford

Hi,

Last year I transferred a fairly substantial index tracking fund investment from L&G, over to a Hargreaves Lansdown Stocks & Shares ISA

Although the HL website/interaction is excellent, I am unhappy about the platform fee. With hindsight I should have done more research.

I am paying 0.45% p.a. with HL. With the amount I have invested I can save about £350 per year by moving to iii, or even more if I go to Selftrade and avoid their inactivity charge.

Another factor of concern for me is related to the risk of having many eggs in one basket. HL are covered by the Financial Services Compensation Scheme but only to the tune of maximum £50k. I know it is unlikely that HL would fail due to the size and nature of the business but even so . . . . I think better to spread my investment across multiple providers?

So my plan was to open an ISA account with iii and transfer my tracker there with a fixed annual fee of £80.

Then open another ISA account with Selftrade and use that to start a new tracker which I would pay into monthly, therefore eventually spreading my risk across providers but also enabling me to diversify my investment to a new sector (I would choose a different type of tracker).

I'd thought of leaving the HL account open as I have also bought some individual shares and the charges for share dealing I find acceptable (plus it's a small investment at present)

The question I have is, I can't find a definitive answer to whether I can have multiple (x3) stocks & shares ISA's with different providers and if I can, any rules around restrictions on payments into more than in the same year (is it down to me to make sure I don't go over allowance)?

If I can't have multiple providers, do I ultimately end up with a lifetime of ISA investment with one provider and a paltry guarantee of £50k?

Thoughts from those more knowledgeable much appreciated.

jimjames

You can have S&S ISAs with a different provider each year so theoretically could have around 16 by now if you so wished.

Bear in mind what the FCSC limit is for and the circumstances where you may need to claim. You may feel as others have done that the limit isn't relevant for determining where you hold you ISAs. Check the exit fees from HL. Transfers of funds may cost but cash may not be as much.

iWeb are another option. They have an opening fee of £200 but that's it so after year 2 and a bit you'd be better off than with iii.

bowlhead99

You can have multiple providers. What you can't do is keep paying into those separate providers in the same tax year. All "current year" money in S&S must sit in the same place. But that's only £15-16k or so. Your historic assets from previous years can be split among as many providers as you like (eg you could sell £50k of the l&g fund, move the cash to iii, move the other £50k of l&g to selftrade, and put your new 2016/7 contributions in TD direct. And next year open another one with Charles Stanley, and so on. So you could have four or more, if you wanted, but only one would be the "current year" one which was taking new contributions.

Most people tend to consolidate on to a small number of providers because for example it is a headache if you want to rebalance between holdings, and also some providers effectively give lower fees per pound when you have more pounds invested.

As an aside, you mention you are currently just tracking one market and have a relatively huge amount in it (several years contributions and growth). You suggest starting another one investing in something else so that *eventually* you will have successfully diversified into something else via a different type of tracker. At £15k a year maybe after a decade or two eventually you'll have £200k in each fund.

Respectfully, that is bonkers. Having realised you need to diversify, the correct thing to do is to take the £100k+ from your current tracker and diversify out into multiple funds and create a proper portfolio NOW. Then when you make additions going forward, add to each of those funds or asset classes - either a bit of everything each month or by rotating what you buy from month to month or quarter to quarter.

NOT gradually add £100k of US equity markets then £100k of Asian markets then £100k of bonds then £100k of emerging markets and then £100k of smaller companies and only after fifty years finally get around to adding a fund for Europe ex-UK.

dunstonh

Failure of a platform is possible. Indeed, one platform has recently filed for administration. However, that was bought out of administration and that is the likely outcome of any failed platform. A failed platform has an income stream but insufficient capital to meet it's liabilities. When it goes into administration, the administrator will sell if it can be carried on as a going concern or will sell off the assets.

The investments on the platform do not belong to the platform. They cannot be used by the administrator. You don't lose money because the platform has gone into administration. You may lose the internet site and ability to transact for a period but that is the extent of the problem.

FSCS then really only covers fraud. The fraud would need to be severe enough to bring down the company. So, there is actually very little protection offered by the FSCS scheme in respect of investment platforms. It is actually more valuable in respect of the individual investments held on the platform. That is where you should perhaps consider the £50k limit.

(I would choose a different type of tracker).

Please tell me that you are not currently 100% in one tracker? That is awful investing if so. That is doing more damage than the charges.

chockydavid1983

Interesting. The £50k limit still confuses me a bit. If all goes well within a couple of years I could have £50k in VGLS 100 via the Cavendish Online platform. Does the £50k limit apply to providers like VG? Or is it the individual funds that make up the LS 100? Or the individual companies I'm invested in?

Thanks,
Chris.

jimjames

dunstonh wrote: »

Please tell me that you are not currently 100% in one tracker? That is awful investing if so. That is doing more damage than the charges.

I did wonder the same. But the OP hasn't said which tracker it is and I'm not sure if a vls100 or worldwide tracker would be awful investing?

le_loup

NickHStamford wrote: »

With the amount I have invested I can save about £350 per year by moving to iii, or even more if I go to Selftrade and avoid their inactivity charge.

Read the III thread before you jump again.

dunstonh

jimjames wrote: »

I did wonder the same. But the OP hasn't said which tracker it is and I'm not sure if a vls100 or worldwide tracker would be awful investing?

The VLS100 is a multi-asset fettered fund of funds and not a tracker (the underlying assets are made up of passives but the fund itself is not classed as a tracker).

A worldwide/global tracker would not be awful investing. That is fair to say. However, the vast majority of the population wouldn't have the risk profile/capacity for loss to go 100% into a global tracker. So, the concern would be risk rather than the actual asset make up.

Does the £50k limit apply to providers like VG? Or is it the individual funds that make up the LS 100? Or the individual companies I'm invested in?

The 50k limit applies to VLS100 as a single fund. Not the underlying assets/funds that make up the fund. If you held the individual funds that make up VLS100 yourself then each of those would have a £50k limit. However, with VLS you dont. you hold the VLS fund and its at that level that the protection is applied to.

Linton

chockydavid1983 wrote: »

Interesting. The £50k limit still confuses me a bit. If all goes well within a couple of years I could have £50k in VGLS 100 via the Cavendish Online platform. Does the £50k limit apply to providers like VG? Or is it the individual funds that make up the LS 100? Or the individual companies I'm invested in?

Thanks,
Chris.

Does it matter anyway? If you buy units in a fund, you own part of the fund. If Vanguard goes bust the fund carries on and would be transferred to some other manager. Vanguard dont own the fund, so it couldnt be used to pay Vanguards debts.

Your risk is mainly that Vanguard are a giant scam taking in £Bs (or $Bs) and squirreling the money away, just presenting you with fake evidence that you are holding genuine investments. Does this seem conceivable to you?

chockydavid1983

Thanks guys.
I'm not terribly worried about the risk as such, it's just sometimes hard to get your head around what would actually happen in reality if companies go bust. It seems more complicated than e.g. the FSCS limit. I guess if certain series of events do happen there's a lot more to worry about than the value of stocks! :-)

Chris.

NickHStamford

Thanks to all who have posted so far - food for thought.

I confirm that I am currently just about 100% in one tracker, apart from some individual stocks, and some cash in a cash ISA.

It's L&G UK All-share Index Tracker.

I set up monthly payments a long time ago (circa 2003 iirc) and just forgot all about it, and it's accrued over time.

I've not used up the ISA allowance each year as I don't much like debt and have tended to pay down my mortgage as well as invest in the ISA. I've not had the income to provide the luxury of doing both.

I know I must diversify. The ISA is really a pension fund and I am early 40's so just been putting off dealing with it, as retirement is at least a couple of decades away so if the UK market bombs it's of no real impact to me as it's only paper losses until I need to do something else with the investment. However I do agree with the point made about it being bonkers to start investing into something else from scratch today with a view to providing some balance.