Calculating Fees for a Passive Portfolio

investabit

I finally got round to opening a Stocks and Shares ISA after the Brexit vote. I picked HL as a platform, as the website was easy to navigate, and picked 5 funds for a passive portfolio. I have since realised that I will be able (and intend) to max out my ISA contribution each year, so turned my eye to the platform/fund management fees. Looking at Monevator (can't post links yet), I picked out iWeb for comparison (£200 account opening fee, £5 per trade, no annual fee).

Assuming £20k lump sum contribution each year, used to top up and rebalance the funds each April (so only 5 trades a year), and that each the year value of the portfolio rises equal to the fees paid that year (to simplify the calculation), I see the cumulative platform charges as:

Year  iWeb    HL
1      £225    £90
2      £250    £270
10    £450    £4,950
20    £700    £16,020
30    £950    £27,270

So a massive £26,320 difference in platform fees over the period. The same funds are available on both platforms, but have slightly higher management fees on iWeb (even though HL does not indicate a discount). Adding management fees over 30 years into the mix, I make iWeb versus HL as £20,061.50 versus £42,336. Making iWeb £22,274.5 cheaper.

Am I missing something? Are iWeb making enough to survive as a platform? The difference seems huge, I should probably be switching in April.

masonic

iWeb is part of Halifax Sharedealing, so I don't think you need to worry about its ability to survive. Also, most people aren't disciplined enough to keep their trading costs as low as your projections.

HL is very pricey for larger amounts invested in open ended funds, but there are ways of avoiding the high charges (use ETFs or Investment Trusts and fees are capped at £45 plus dealing costs), so, aside from the open ended funds, the pricing model is not so very different.

bigfreddiel

Monevator and The Telegraph both have comparison tables to show the most cost effective platform for different sized portfolios.

TD Direct is completely free for equities as long as your portfolio is bigger than £5k or so and £12.50 trading, £1.50 for reinvestments. Suits me for my ETF portfolio fj

enthusiasticsaver

I am with Cavendish who has always been relatively competitive, certainly more so than HL but I will be moving to Halifax sharedealing or iweb as my investment has got larger.