How much will fees hurt me?

dunstonh

It's still a loss of 11% of your final capital sum, you might be cool with that but many won't be

You forget inflation.

And yes, I am cool with it as I would not want to limit my portfolio to Vanguard funds.

His will is on record that his instructions are for his 90% of bequest to his heirs to be invested in S&P trackers

That is not correct. He has no ability to make such a demand from the grave.

He said it to an audiance of US investors who are domiciled in the US. If I was in the US, I would be 100% trackers too. However, we are in the UK and do not suffer the same issues. (Not just tax but also that US investors tend to be very inward looking).

Audaxer

dividendhero wrote: »

That's very much thin end of the wedge, these charges compound horribly

Take the OP's £1,000 and an annual return of 5%.

By my reckoning the return after 40 years the return will be £7,039. but after the excess charges of 0.3% the returns fall to £6,278. Around £800 pound difference !!!

The OP and other half are investing £500 a month, so the extra costs after 40 years will be significantly more.

bostonerimus

dunstonh wrote: »

He said it to an audiance of US investors who are domiciled in the US. If I was in the US, I would be 100% trackers too. However, we are in the UK and do not suffer the same issues. (Not just tax but also that US investors tend to be very inward looking).

For tax advantaged investments there's no difference between the US and the UK......also US and UK investors that are cap weighted and globally diversified should have similar asset allocations.

EdSwippet

Zola. wrote: »

How can I easily work out just how much we would be getting stung with via HL based off a few basic assumptions?

Maybe have a play with this online calculator?

Example results. Initial £10k, additional £500/month over 40 years(!), growth 5%/year. With a 0.67% annual charge the final value is £685,429 with £129,242 lost to charges. With a 0.37% annual charge it is £740,219 with £74,452 lost to charges. Under these (wild?, unrealistic?) assumptions the 0.3% higher fee costs you £54,790 over the term.

bostonerimus

Over 30 years if you invest 1000 pounds a year and get 5% return you'll have 70k, if you pay 1% in fees you'll have 56k, and if its 2% in fees you'll have 46k

So 1% in fees costs you 19% over 30 years and 2% around 33%. Of course, if you can pay the fees and consistently get compensating excess returns then that would be great.

Audaxer

EdSwippet wrote: »

Maybe have a play with this online calculator?

Example results. Initial £10k, additional £500/month over 40 years(!), growth 5%/year. With a 0.67% annual charge the final value is £685,429 with £129,242 lost to charges. With a 0.37% annual charge it is £740,219 with £74,452 lost to charges. Under these (wild?, unrealistic?) assumptions the 0.3% higher fee costs you £54,790 over the term.

Wow, I knew the impact of charges was big but didn't realise how big.

dunstonh

Audaxer wrote: »

Wow, I knew the impact of charges was big but didn't realise how big.

Its not as big as it looks as its future money value.

Just think how much you would save if the supermarkets did not have a profit margin.

Audaxer

EdSwippet wrote: »

Maybe have a play with this online calculator?

Example results. Initial £10k, additional £500/month over 40 years(!), growth 5%/year. With a 0.67% annual charge the final value is £685,429 with £129,242 lost to charges. With a 0.37% annual charge it is £740,219 with £74,452 lost to charges. Under these (wild?, unrealistic?) assumptions the 0.3% higher fee costs you £54,790 over the term.

Thinking about this again, I assume that would only be the case if the investor chose to invest the 0.3% he would be saving in platform charges. If you got to the stage where you had say £200k with Vanguard you would be paying annual platform charges of £300 as opposed to £900 with HL, but probably unlikely you would decide to invest a further £600 that you are not being charged. I also think the HL charge drops to 0.25% at £250,000.

So although the impact would still be significant maybe not as large as you are suggesting.

Drp8713

Nobody in their right mind would pay that much to invest large amounts with HL.

Once your ISA got to £10k you would just switch from open-ended funds to ETFs or ITs so you can keep the service, yet have your fees capped at £45 per annum.

bostonerimus

dunstonh wrote: »

Its not as big as it looks as its future money value.

Just think how much you would save if the supermarkets did not have a profit margin.

If you grow your own fruit and veg you can avoid the supermarket profit margin altogether. You won't be able to get exotic out of season stuff, but what you grow yourself will feed you just as well and at considerably less cost.