Low Cost Broker

stphnstevey

Has anyone any experience with X-O?

I like their SIPP as it doesn't have an annual charge (refunded by Jarvis). Elsewhere looks like around £200/yr

They dont offer any RS dealing discount, like Halifax or iii, but the average trading fee (average of purchase and sale trading fee) is about the same. I will likely make annual contributions and then into one or two ETFs, so only about 1-2 trades a year, which will hopefully make it an extremely cheap SIPP. I will most likely wait for the tax rebate to be added before investing

Can you pay the fees with cash outside the SIPP, without it being classed as a contribution? (H&L let you pay the fees from other non SIPP accounts) When they refund the fees, does that go back into your SIPP account (just I am thinking about the cost of reinvesting that)?

I have not used a fee based broker before, do people guess the amount of their trades and leave enough in to cover that? Presume there is some cash drag?

Looking into Jarvis, the parent company is AIM listed and the x-o management company seems highly profitable from the accounts

Speaking with Gaudi about small queries, they picked up the phone quickly, were very knowledgeable and were able to answer my queries


A little bit different, as I have a SSAS as well, I did look at dealing accounts that allowed them, such as AJ Bell and iii. But both now require a LEI, which would add costs of applying £115 + VAT (£140) with annual renewal fees of £70 + VAT (£84). As I can do the same in a SIPP, with potentially no annual fee with x-o, the SIPP seemed less expensive

I would like a dealing account for a Ltd Company, but that also seems to require a LEI and same costs. Anyone anything cheaper for a Company?

bowlhead99

stphnstevey wrote: »

Can you pay the fees with cash outside the SIPP, without it being classed as a contribution? (H&L let you pay the fees from other non SIPP accounts) When they refund the fees, does that go back into your SIPP account (just I am thinking about the cost of reinvesting that)?

Just in case you haven't thought this through, you realise that £10 of fees paid with your SIPP money only costs you a net amount of £8 or £6 or £5.50 or £4 or whatever, depending on your exact marginal rate of tax relief, while if you pay it with cash out of your pocket it will literally cost you the full £10?

Being able to fund the charge from somewhere *other* than the SIPP (i.e. paying for it with fully taxed money so it costs you the full £10 net of income taxes - or the equivalent of a fair bit more than that, gross...), is a choice that would only be rationally made by someone who wanted to fully max out their current year pension amount into investments (lower of earnings and [£40k or more depending on prior year carryforward]) and therefore didn't have any capacity to put a few pounds of extra money into the SIPP account to get tax relief and then pay the fee with the tax-relieved money.

Obviously you mention you have a SSAS so probably not a complete pensions newbie or a relative pauper but if you are absolutely maxing your contributions threshold you will be in a tiny minority of site users here.

I have not used a fee based broker before, do people guess the amount of their trades and leave enough in to cover that? Presume there is some cash drag?

You need to be able to pay fees when they become due. For transactions fees it's not a problem because you know when buying the investment what the investment plus its associated transaction fees is going to cost. But yes if they charge your account periodically with an admin fee, custody fee, sipp service fee, whatever they call it, you will need cash on hand in the account to cover it. How did you pay fees at other brokers? Most would have an ongoing fee of some sort.

Anyway the short answer is from what you were saying further up your post, you are going to have a very cheap SIPP with £<20 of transaction fees and a £100 SIPP service fee that's going to be refunded anyway. So even if you had £100 sitting around all year idle in the account, the missed income on £100 is not much of a drag on your IRR of a portfolio valued in the tens or hundreds of thousands of pounds. Say you are losing 10% of missed profit on the £100 over an entire year - it's only a tenner, and you've identified that there aren't any other SIPPs that come within £10 of the operating costs of this one.

I would like a dealing account for a Ltd Company, but that also seems to require a LEI and same costs. Anyone anything cheaper for a Company?

If you're establishing a relationship between a company you own (or a SSAS for which you're trustee of the scheme) and a broker, you are going to need an LEI, as that's how they record which entity they are transacting with for the purpose of regulatory compliance. Prior to this year you only needed to get yourself an LEI to support the reporting of certain derivatives trading which most small businesses were not engaging in anyway. But under the new rules and regs you'll struggle to avoid it.

stphnstevey

I have a H&L SIPP which I have kept open with the minimum £1000, kept in cash so as not to incur a fee, as it enabled me to retain the reduced 0.25% fee I had negotiated

I am going to be using an X-O SIPP as I found it the cheapest for what I want to do, with no annual charge

The H&L £1k money is sat there gaining 0.05% interest and being eroded by inflation...

My options seem to be:
1) Close the SIPP, pay a £30 fee, lose the reduced 0.25% fee
2) Put it in a tracker fund, pay the £2.50 annual H&L fee, and hope the investment increase more than 0.25% H&L fee and 0.7% tracker fund fee (so more than 1% a year)

As the £30 fee is 3 years of the tracker fund fee and H&L management charge, (2) seems the better option

Can anyone check my logic?

Can I sell down the fund to pay fees with H&L or do I need to keep some aside? How often is the fee charged?

stphnstevey

I am encountering TRANSACTION FEES from some brokers in the quote of the cost, which is not included with other brokers - is this a charge for a fund/ETF specific to that platform?

I am looking to buy GBP versions of ETFs, but I am still quoted a FX fee - how does that work?

grey_gym_sock

stphnstevey wrote: »

I am encountering TRANSACTION FEES from some brokers in the quote of the cost, which is not included with other brokers - is this a charge for a fund/ETF specific to that platform?

this might refer to the internal transaction costs incurred by the ETF. brokers have a new obligation to (attempt to) pass on this info to investors.

if that's what it is, then the internals costs are the same regardless of what platform you use. so any difference between brokers can be ignored.

(and, whilst internal transaction costs are real, the methodology being used to report them has serious issues, so i wouldn't necessarily believe the figures, when you are provided with them.)

I am looking to buy GBP versions of ETFs, but I am still quoted a FX fee - how does that work?

i'm not sure.

providing you have a GBP line of an ETF (and are buying using GBP), there won't be FX costs on purchase/sale.

this could be about internal costs again?

some ETFs do pay dividends in USD or EUR, even when you hold the GBP line, so there can be FX costs to convert dividends back to GBP. it could be about that?

stphnstevey

grey_gym_sock wrote: »

this might refer to the internal transaction costs incurred by the ETF. brokers have a new obligation to (attempt to) pass on this info to investors.

if that's what it is, then the internals costs are the same regardless of what platform you use. so any difference between brokers can be ignored.

(and, whilst internal transaction costs are real, the methodology being used to report them has serious issues, so i wouldn't necessarily believe the figures, when you are provided with them.)



i'm not sure.

providing you have a GBP line of an ETF (and are buying using GBP), there won't be FX costs on purchase/sale.

this could be about internal costs again?

some ETFs do pay dividends in USD or EUR, even when you hold the GBP line, so there can be FX costs to convert dividends back to GBP. it could be about that?

Thanks, this was on Youinvest (AJ Bell) in their quote on costs - I will email the and see if these are actually charged or just a representation

bowlhead99

AJ Bell like every other broker will charge you a transaction fee to buy a share of the ETF on the stock exchange because nobody (whether HL, X-O or AJBell) will place your order into a busy real-time market and settle it for free. They would usually be quoted at £x per trade but can sometimes by percentage based if you are doing massive trades or old-school telephone dealing.

The fund itself will of course incur some transaction costs when it buys the underlying companies every time the index or model portfolio that it's following adds a new holding or kicks one out. Those are quoted in percentage terms as an extra estimated ongoing running costs (it was rare to quote them at all before change of regulations earlier this year) and as GGS mentions above, the estimations can be quite flawed.

On the FX side whether the broker charges you an FX fee depends on whether you're buying a share priced in, or receiving a different currency from, what your cash account is. Usually if you ask the broker what his costs will be, FX transactions are mentioned for completeness because he doesn't really know what you're going to buy. It's true that some US or global ETFs will pay their divs in dollars even if the market for that class is priced in pounds.

stphnstevey

bowlhead99 wrote: »

AJ Bell like every other broker will charge you a transaction fee to buy a share of the ETF on the stock exchange because nobody (whether HL, X-O or AJBell) will place your order into a busy real-time market and settle it for free. They would usually be quoted at £x per trade but can sometimes by percentage based if you are doing massive trades or old-school telephone dealing.

The fund itself will of course incur some transaction costs when it buys the underlying companies every time the index or model portfolio that it's following adds a new holding or kicks one out. Those are quoted in percentage terms as an extra estimated ongoing running costs (it was rare to quote them at all before change of regulations earlier this year) and as GGS mentions above, the estimations can be quite flawed.

On the FX side whether the broker charges you an FX fee depends on whether you're buying a share priced in, or receiving a different currency from, what your cash account is. Usually if you ask the broker what his costs will be, FX transactions are mentioned for completeness because he doesn't really know what you're going to buy. It's true that some US or global ETFs will pay their divs in dollars even if the market for that class is priced in pounds.

Yes I realize there is a broker dealing charge and also a fund/ETF running cost

But there appears to be a TRANSACTION CHARGE as well as a FX charge

I had to go through them all again, so its taken me a while

1) Transaction Costs/fees

- Shown on Youinvest and H&L.
- H&L define these as "The explicit cost the manager incurs whilst dealing......".
- Adds 0.1-0.2% to effectively the OCF - not too much of a problem, but should be in OCF
- Examples:
HSBC AMERICAN INDEX CLASS C - ACCUMULATION
(http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-american-index-class-c-accumulation/costs)
FIDELITY INDEX US CLASS P - ACCUMULATION
(http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/fidelity-index-us-class-p-accumulation/costs)
SWDA (http://www.hl.co.uk/shares/shares-search-results/i/ishares-iii-plc-core-msci-world-acc/costs)

2) FX charge

- Shown on Youinvest when go to deal and review charges
- 1% - enough to consider holding funds instead
- Examples:
CSP1, VUSA, HMWO

But not on IUSA, SWDA

grey_gym_sock

stphnstevey wrote: »

1) Transaction Costs/fees

- Shown on Youinvest and H&L.
- H&L define these as "The explicit cost the manager incurs whilst dealing......".
- Adds 0.1-0.2% to effectively the OCF - not too much of a problem, but should be in OCF

well, OCF has always been defined to exclude transaction costs. could be confusing to redefine it now.

2) FX charge

- Shown on Youinvest when go to deal and review charges
- 1% - enough to consider holding funds instead
- Examples:
CSP1, VUSA, HMWO

But not on IUSA, SWDA

i have a youinvest account, and just logged in to look at this, and i think it's an error in youinvest's info.

they would charge 1% for FX each time you buy (or sell) a share that is traded in a currency other than GBP. but those tickers are all for the GBP lines of the ETFs. so FX shouldn't come into it.

(they are ETFs which also have a USD line. which might be where the error comes from. but then IUSA and SWDA have USD lines, too.)

bowlhead99

stphnstevey wrote: »

1) Transaction Costs/fees

- Shown on Youinvest and H&L.
- H&L define these as "The explicit cost the manager incurs whilst dealing......".
- Adds 0.1-0.2% to effectively the OCF - not too much of a problem, but should be in OCF

From the fund accountant's point of view, it shouldn't be in OCF. It's not a cost of running the fund and doesn't appear in an expense account within the fund's financial statement. Simply, it's an incidental cost of buying assets, so it sits in the balance sheet as part of the asset cost. The difference between the asset cost and its current value is an unrealised gain. When you sell the asset (incurring some more costs to do so) you get net proceeds of sale - and the net proceeds of selling the asset less the cost of buying the asset is the realised gain (or loss) on your ownership of the asset. Just like an individual would do if buying and selling a share directly and reporting their capital gains to HMRC.

So, such "transaction costs" aren't very visible because they are not a separate expense line within the reported performance. Accounting standards don't tell you to work out the gains that you would have got if you could somehow have bought and sold the assets without transaction fees, and report those bigger gross theoretical numbers, and then separately book some ongoing expenses. The transaction costs aren't a component of normal ongoing operating costs because they only exist when the fund actually has some buying/selling activity, which might vary if your fund is expanding or contracting or finding opportunities or not finding them.

As such, any transaction cost reporting is based on some sort of estimation or projection. Last year they were typically not reported at all in the industry, and now the 'powers that be' have said that they should be, so they are. Not really worth doing all your calcs all over again for them though (given the relative inaccuracy inherent in how they pull the figures out, and small numbers if you're using trackers anyway).

2) FX charge

- Shown on Youinvest when go to deal and review charges
- 1% - enough to consider holding funds instead
- Examples:
CSP1, VUSA, HMWO

But not on IUSA, SWDA

VUSA pays its dividends in USD even if you choose to fund the capital and receive sales proceeds in GBP by using the sterling class. So, as I mentioned in post #18, your broker will have to charge an FX fee when you're receiving a different currency from what your cash account is. So, they have decided to tell you about their fee when you look at buying it. Ties in with what GGS said in post #16, "Some ETFs do pay dividends in USD or EUR, even when you hold the GBP line, so there can be FX costs to convert dividends back to GBP".

I can't speak for the other ones that do/don't list an FX fee from the broker as I haven't looked them up. May well be the same issue.