Decision: active v passive multi manager v nutmeg v DIY

Tarquinius

Thank you all so much for the great replies to my post!


Taking account of the advice, I'm most likely going to go with a low-cost platform and buy a balanced portfolio of funds (mainly index funds, with a few active funds where a manager may truly add value). I plan to hold these long term, with ocassional re-balancing.

My next decision is which platform. Can I ask for advice on this?

Currently our family's ISAs and JISAs are all with Best Invest - but I now realise how expensive they are. (I even rang them today to say my Mum had an ISA with them for 15+ years but that I may have to move as they're expensive, just to see if they could improve their offer, but they couldn't).

I beleive the cheapest platforms for me (by a large margin) are either Interactive Investor or iWeb. (I have used both the 'Platform charges v32' excel model and also the monevator calculator to work this out).

My only potential concerns about switching to ii or iWeb are:

a) would these platforms provide a strong range of index tracker OEICs / unit trusts. (as these seem simpler than ETFs, according to Monevator)


b) How do the 'initial charges' work on platforms when buying OEICs / unit trusts? For example with Best Invest (BI) many funds have a circa 5% advertised intital charge, but for most funds this is waived by BI. Would all platforms waive this initial fee for unit trusts/OEICs? I don't want to be paying this 'initial fee'.

I'd welcome any recommendations of good platforms for holding mainly OEICs / unit trusts, and where the level of trades will be minimal on an ongoing basis.

Many Thanks again.

zagfles

I think most platforms waive the initial charge. Not sure why funds still have an initial charge - think this is hang over from the days when "advice" charges were wrapped in fund charges and you could get round it using an execution only broker.

Consider service as well as price. I use HL, and I know even with a negotiated discount on the platform fee (0.25%) they aren't the cheapest, but the platform is excellent as is their CS.

There is a very long thread on II you might want to read: https://forums.moneysavingexpert.com/discussion/4904374/iii

Could always ask for a discount with Best Invest if you're happy with the platform but it's a bit expensive? Don't have a clue if they offer discounts.

Thrugelmir

Audaxer wrote: »

They yield about 4% at present, so if you invest £10k you should get around £400 in dividends each year rising with inflation.

There's no linkage between inflation and company profitability. Some major UK shares declare dividends in US $ and Euro €. While payouts have increased much of this is due to currency exchange movements rather than an increase in actual dividend.

For example

BP has paid the same dividend for the financial years ended 2014, 2015, 2016 and 2017. (US$)

Likewise Shell no change for past 4 years

HSBC same dividend for past 3 years.

IT's can pay dividends out of capital reserves not just income reserves. Which enables them to smooth returns and also provide annual increases.

Other factors to watch are the historically low levels of dividend cover, companies paying increased dividends out of retained reserves, companies generating insufficent cash to cover the dividends paid and finally companies increasing levels of borrowing to fund dividends.

Dividends are not simply cheques to be collected from an ATM machine. As with an event such as Deepwater Horizon . A company's fortunes can change overnight.

Tarquinius

zagfles wrote: »

I think most platforms waive the initial charge. Not sure why funds still have an initial charge - think this is hang over from the days when "advice" charges were wrapped in fund charges and you could get round it using an execution only broker.

Consider service as well as price. I use HL, and I know even with a negotiated discount on the platform fee (0.25%) they aren't the cheapest, but the platform is excellent as is their CS.

There is a very long thread on II you might want to read: https://forums.moneysavingexpert.com/discussion/4904374/iii

Could always ask for a discount with Best Invest if you're happy with the platform but it's a bit expensive? Don't have a clue if they offer discounts.

Thank you - that's really helpful. I would like to stay with Best Invest and did call them, but I will ring them again to push for a discount on their fee (given we are long standing customers and our family has 5 ISAs with them).


I've read some of the thread on II and I won't be using them for now given all the issues. Which leaves iWeb as an alternative - can I ask for views on their service level and range of index funds? I am wondering if it is a case of 'you get what you pay for' ?



I'm still not sure I understand the 'initial fee' for buying funds and whether all platforms discount this (as BI and HL appear to)?

dunstonh

I'm still not sure I understand the 'initial fee' for buying funds and whether all platforms discount this (as BI and HL appear to)?

MiFID II requires the disclosure of initial charges. So, you would expect the field to be showing. However, most funds have no initial charges via any platform (apart from slight bid/offer spreads on UTs and soft closures). The same funds often have an initial charge if bought direct from the fund house.

MK62

grey_gym_sock wrote: »

indiscriminate buying can drive share prices up, beyond sensible levels.

that buying can be via individual shares, or via active funds, or via tracker funds.

people buying S&P 500 trackers are agnostic about which shares in the index are best, and they end up driving up the prices of all shares in the index a little. people who pile into (e.g.) FAANG stocks directly will drive up the prices of just those shares, but by a larger amount (for the same amount of cash deployed).

so IMHO, if you think (e.g.) the FAANGs are overvalued, then you should blame the active stock pickers (either direct investors or active fund managers); but if you think it's the whole market, you should blame the investors buying trackers.

in previous bubbles, the whole market may well have been overvalued, but the overvaluation has tended to be concentrated in specific kinds of stocks. i would be surprised if that's different next time.

Well I did say not everyone agrees....;)

However, firstly I have to say I'm not blaming nor looking to blame anyone...and secondly I really don't agree with your market analysis.......
You mentioned indiscriminate buying......how do you define that?
To me that means buying with no regard to the valuation or other fundamentals......exactly what index funds do (and have to do)......you seem to be suggesting that active fund managers are also doing this but without seeing any evidence I simply don't believe that is happening, not to any great degree anyway.....closet trackers perhaps?.....and I very much doubt that institutional investors behave in this way either.

I'm not anti passive investing.....I have quite a lot in them myself, but I am open minded about the effects the trend toward that style of investing might be having. Some don't agree and that's fine by me.....I'm all for open debate and getting other viewpoints....one of the best ways to learn about all this (apart from bitter experience of course...;))

Rollinghome

Tarquinius wrote: »

My only potential concerns about switching to ii or iWeb are:

a) would these platforms provide a strong range of index tracker OEICs / unit trusts. (as these seem simpler than ETFs, according to Monevator)


b) How do the 'initial charges' work on platforms when buying OEICs / unit trusts? For example with Best Invest (BI) many funds have a circa 5% advertised intital charge, but for most funds this is waived by BI. Would all platforms waive this initial fee for unit trusts/OEICs? I don't want to be paying this 'initial fee'.

I'd welcome any recommendations of good platforms for holding mainly OEICs / unit trusts, and where the level of trades will be minimal on an ongoing basis.

Many Thanks again.

The funds offered by Iweb are here: https://www.markets.iweb-sharedealing.co.uk/funds-centre/ and iirc there's a similar list for II. Overall, HL offer slightly more funds than Iweb with HL having some that Iweb don't offer and a few vice versa. I'm not sure that any platforms still take the 'initial charge' now.

Iweb don't seem to offer any 'super-clean' funds as do some large platforms, which can offer small savings on the OCF. Unless you want those particular funds, as pointed out here, they may not add up to much: http://monevator.com/why-investors-should-be-wary-of-discounted-funds/

I still have accounts at HL (paying 0.25% not 0.45%) but haven't added money there for years. The bulk of my investments are now with Iweb. Massively cheaper for me than HL and, perhaps surprisingly, prefer their fast and clean website to the slow and cluttered HL site constantly pushing thinly disguised sales material.

Cost differences will depend on individual circumstances and beauty lies in the eye of the beholder, some may actually enjoy the hard sell of HL. Using multiple platforms works well for me but if I were to drop one, it would certainly be the very irritating HL (especially as some of the tools that were broken during their website "upgrade" several months ago still haven't been fixed).

aroominyork

zagfles wrote: »

Consider service as well as price. I use HL, and I know even with a negotiated discount on the platform fee (0.25%) they aren't the cheapest, but the platform is excellent as is their CS.

Don't expect to be able to negotiate a discount on HL's 0.45%. A few people have managed it but it's an exception, not a rule. I tried to get a discount before moving my and my wife's accounts worth over £300,000 and they weren't interested.

Tarquinius

aroominyork wrote: »

Don't expect to be able to negotiate a discount on HL's 0.45%. A few people have managed it but it's an exception, not a rule. I tried to get a discount before moving my and my wife's accounts worth over £300,000 and they weren't interested.

Thanks. I just called BI, explained we are very long standing customers, have 5 ISA account holders with them in the family and £65k in total... but they won't budge on their 0.4% fee.


So...decision time... stick with BI (and I'm reasonably happy with them otherwise) or take the plunge into the unknown and switch to iWeb. On my mum's isa I reckon she stands to save about £150 / year in fees on a balance of about £46k. (The BI 0.4% might come down to around 0.1% with iWeb)...


Before I take the plunge, are there any downsides with iWeb (My plan is to select a few index trackers (not ETFs) and maybe a couple of actively managed funds, and leave them for the long term.)

grey_gym_sock

MK62 wrote: »

However, firstly I have to say I'm not blaming nor looking to blame anyone

sure ... i was using the word "blame" a bit loosely, to mean something like: whose actions might cause a bubble to form?

...and secondly I really don't agree with your market analysis.......
You mentioned indiscriminate buying......how do you define that?
To me that means buying with no regard to the valuation or other fundamentals

i'm happy with that defintion.

......exactly what index funds do (and have to do)

well, i look at an index fund as a tool. it's just doing what it's supposed to. it's the workperson using the tool who may be indiscriminate.

if i buy an absurdly overpriced individual share, via an execution-only stock broker, it's me who's buying indiscriminately, not my stock broker. and i look at index funds in the same way.

......you seem to be suggesting that active fund managers are also doing this but without seeing any evidence I simply don't believe that is happening, not to any great degree anyway.....closet trackers perhaps?.....and I very much doubt that institutional investors behave in this way either.

in a bubble, many active fund managers end up buying into the most overpriced companies. because if they don't, their short-term performance suffers, and they will probably be sacked, or at least see their funds under management shrink.

i'm not saying this is happening now. just that it can happen.

with active funds, i think it can be either the fund manager who buys indiscriminately, or the investor who buys the fund. for instance, if it's a tech fund, and there's a tech bubble in full swing, the manager may not have much choice; at best, they may be able to buy the slightly-less-overvalued tech shares. and the investor is being indiscriminate by putting more money into a tech fund at the time.