ISA and share dealing accounts: Rebalancing, regular investments and platform fees

Snakey

I am about to a) rebalance my existing ISA investments, b) add this year's £20k ISA money in one lump sum, and c) open a non-ISA share dealing account into which I will put a lump sum (of around £20k) followed by money each month.

My ISA is with Halifax, and is currently around £155k. It's in about ten funds, based on financial advice taken (they are not physically managing it for me though).

With luck I can merge the processes in a) and b) so that I won't need to sell as well as buy - I can just add different amounts to each holding to bring it all back in to balance. So that's all OK I think. A one-off fee is acceptable when each purchase is around £2k.

Item c) however has hit me with the dithering stick, not so much with the lump sum but in relation to the subsequent months. I don't know how much I'll be paying in each month but I can't see it being more than £1,000-1,200. So, is it worth mirroring the ISA funds? That was my initial plan, but it seems daft to pay £2 per purchase on individual purchases of that level. Should I just stick all the future months in to a single wide-ranging general fund such as a Vanguard? Or skip investing altogether in months when I've got less than a certain amount? Or am I being daft to fret over twenty quid here and there when I am supposed to be following a long-term investment strategy?

What do other people do?

And leading on from all that, does it make sense to have my ISA and my non-ISA accounts on the same platform? Is there a benefit to doing that, or is it going to be the exact same set of transfer fees and the same sort of timescale regardless (e.g. if I should "bed and ISA" at the year-end)?

I suppose if there's no benefit, I could consider a different platform where they charge a percentage of the balance and no dealing fees (if there is such a platform) - any reason not to do that?

Thanks for reading!

dunstonh

My ISA is with Halifax, and is currently around £155k. It's in about ten funds, based on financial advice taken (they are not physically managing it for me though).

Never buy investments from a bank. Halifax investments are generally quite poor. They choice should be between DIY and IFA. Not sales forces FAs.

If you are going to DIY then move away from Halifax.

And leading on from all that, does it make sense to have my ISA and my non-ISA accounts on the same platform?

absolutely does. You can bed & ISA/bed & pension and use new money to go into the GIA to enable your CGT allowances to be used more efficiently. Plus, a number of platforms tier their charges based on total amount on the platform.

ColdIron

I'm guessing the OP is using Halifax Share Dealing

bowlhead99

Snakey wrote: »

Item c) however has hit me with the dithering stick, not so much with the lump sum but in relation to the subsequent months. I don't know how much I'll be paying in each month but I can't see it being more than £1,000-1,200. So, is it worth mirroring the ISA funds? That was my initial plan, but it seems daft to pay £2 per purchase on individual purchases of that level.

You can put the new money into the ten funds over the course of the year, but don't need to buy all ten funds each month. At that point you'll have £175k in your ISA and £20k+ in the unwrapped account plus a bit of growth, so call it £200k; your new £1kish per month is only half a percent so is not going to throw your percentages uncomfortably off each time you add that money to one of your holdings.

So, £2 per month on a normal full 12-month year is £24 to deploy the money over the course of the year in one fund at a time. If there's one generalist fund you'd be happy having it all in, put it in that. Or just add it to whichever fund is "looking a bit light" each month. £24 of transaction fees on £200k portfolio to deploy your new money over the course of the year is basically nothing. Your portfolio might move 40x that much in a single day on the whim of the market

And leading on from all that, does it make sense to have my ISA and my non-ISA accounts on the same platform? Is there a benefit to doing that, or is it going to be the exact same set of transfer fees and the same sort of timescale regardless (e.g. if I should "bed and ISA" at the year-end)?

it's convenient to have everything in one place; one login, and the quickest way of getting the non ISA money into an ISA next April is if the ISA manager already holds your non ISA investments for you.

I assume you are not worried too much about the 'platform risk' e.g. Halifax Sharedealing goes under after it turns out they pocketed billions of customer money and ran off to Brazil instead of actually buying the investments they said they had bought... if you were, that would be a reason to diversify between multiple platforms and benefit from more FSCS protection.

, I could consider a different platform where they charge a percentage of the balance and no dealing fees (if there is such a platform) - any reason not to do that?

Percentage based with no dealing fees for funds is still the dominant charging model (by funds under admin in the industry)so yes, there is such a platform.

But let's say your unwrapped balance is £20k now and you increase it to £30k by March, before moving most of it to your ISA. That's an average of £25k invested, for six months. For back-of-a-napkin maths: on a percentage based platform, £25k for six months is like £12.5k for a year. £12.5k for a year on a 0.25% platform is £31.25 of charges, and there are not many percentage based platforms at less than 0.25%. (ok, Vanguard is 0.15 not 0.25 so would be more like "about £20" than "about £30)

So, if you use Halifax to invest your non ISA money, how many £2 charges will you incur over the next 6 months to deploy your new money? (say, 6 because it's 6 months = £12) and how many £2 charges to deploy your initial £20k? (say 10 because you have ten funds in your main ISA to mirror, =£20). So basically it is costing you £32 to create your £30k of unwrapped investments for six months with Halifax and it would cost you £31.25 to do it on a 0.25% percentage-based platform.

As you can see, for someone with almost £200k invested, these platform fees on the unwrapped investments are basically nothing, and in the grand scheme of things Halifax isn't too costly to deploy your new money . Assuming you are not going to deliberately incur 10x the £2 each and every month because you want to buy ten funds at £50-£300pm with each £1000pm that becomes available. That would be a waste, when you could just rotate your new purchases.

However, the extra cost of a transaction-based service such as Halifax for relatively small values really shows itself when you are in the "selling" rather than "buying" phase on a short term deal. Next April you will want to liquidate £20k of your £30-35k of holdings in the unwrapped account. Building the account up, the cost to buy with Halifax rather than percentage based was similar. But unlike buying on a monthly plan, selling 10 funds does not cost only £2 per trade. 10 ad-hoc transactions is £125!


So, feel free to stay with Halifax if you know and love it. If it ain't wrong don't fix it etc. However, if you are buying some holdings from now until April and will then want to sell them again, be aware of that £12.50 per trade, to liquidate £20k of your portfolio to generate the money for next season's ISA. You might prefer to use a generalist fund instead of mirroring your bespoke 10-fund portfolio. After all, this unwrapped money is only £20-30k out of your portfolio which holds mostly (£175k+) bespoke ISA.

Tom99

If your aim is 10 funds with c £20k in each then just spend £2 and buy more of the fund with the lowest value that month.

dunstonh

ColdIron wrote: »

I'm guessing the OP is using Halifax Share Dealing

I did wonder that but the OP said they were given advice. Halifax share dealin is non-advised.

Snakey

Yeah sorry I was massively unclear there. I edited before posting and missed that what I'd left in was misleading.

I have an IFA who advises me on my pension fund, and (cutting a long story short concerning fee negotiations) I basically take that advice and mirror it in my ISA - but I have to do the buying and selling myself. They sat with me and did the original investments, but now it's down to me.