Fees 'n' Funds

fiisch

I've been investing in a S&S ISA for myself and JISA for my daughter for the past year. Both accounts have roughly £1,500 in currently and are with Orbis. My daughter is two, and I plan to invest just £25 per month plus occasional ad-hoc £200 additions at birthdays and Christmas.

My S&S ISA was set up mainly for me to get a feel for investing this year - we are due to move house imminently, so have other priorities currently, but I'm hoping to significantly increase monthly investment (between £250-500 per month once costs from moving level out).

I signed up to Orbis due to the bonus, but would like to go with a more conventional passive index fund. My SIPP (£23,000) is currently invested with Hargreaves Lansdown and is all in Vanguard Lifestrategy 100. I am 32, and am an IT contractor so I don't have a workplace pension as such, but make employer contributions from my limited company which saves corporation tax. Currently, SIPP contributions are a modest £250 a month as 1). I am still building up a buffer to cover times between contracts 2). In the future, I intend to return to permanent work so increased pension contributions will incur a bigger tax saving.

Firstly, I am trying to wrap my head around platform fees. I like the idea of having all my investments under one roof and like the HL app, although on the flip side it is perhaps risky to have SIPP and ISA in one place and Vanguard platform is cheaper - have I understood the fees correctly? Are there any other fees to factor in?

Vanguard
0.15% platform charge
0.22% OCF charge on Lifestrategy 100

Portfolio of £10,000 * 0.37% = £37 / year

Hargreaves Lansdown
0.45% platform charge
0.19% OCF charge on HSBC Global Balanced Strategy

Portfolio of £10,000 * 0.64% = £64 / year

Secondly, is there significant difference between Vanguard and HSBC Global Balanced Strategy fund? Would it be daft to have SIPP, S&S ISA and my daughter's JISA all invested in the same fund longer term? Appreciate amounts at the moment are very modest, but looking to make decent contributions to both this tax year, and don't want to keep changing ISA platform unless there is a sizeable benefit, so HL has the advantage of a greater list of available funds....

bowlhead99

fiisch wrote: »

Firstly, I am trying to wrap my head around platform fees. I like the idea of having all my investments under one roof and like the HL app, although on the flip side it is perhaps risky to have SIPP and ISA in one place and Vanguard platform is cheaper - have I understood the fees correctly? Are there any other fees to factor in?

You have understood the fees correctly. Vanguard's platform is literally 0.3% cheaper per year on all your assets. The downside is that they don't offer a pension product yet and the only assets you can hold on their platform are their own fund products, whereas HL (and other rivals which are cheaper than HL) offer products from a broad range of investment managers.

SIPP and ISA under one roof is not really an issue but once you have £100k+ you might prefer to split them for better 'protection' against a platform failure which could be disruptive even if it didn't cause you to lose money. Given you are not going to be actually doing a lot of logging in to each account anyway over the course of a typical year, it is not much of a hassle to use different providers for different product types.

Secondly, is there significant difference between Vanguard and HSBC Global Balanced Strategy fund?

If the Vanguard fund you are meaning is the 100% equity version you mentioned in the fee example, then:

- The first is a fund that invests 100% of your money into equities around the world, with a quarter of the money in the UK stockmarket indexes and the rest in overseas stockmarket indexes, and you should not be surprised if a few times between now and retirement you see falls in value of 30-50% from peak to trough, before eventually recovering;

- The second is a fund which targets a lower level of volatility than you would see from 100% equities and it spreads your money into other asset classes which over time will include various types of bonds, property companies etc so that only 70% or perhaps even less is allocated to equities, varying the portfolio mix from time to time to maintain the volatility of the fund in the sort of range that someone looking for '5 or 6 out of 10' on the risk scale might want (depending whose risk scale you were using).

Avoiding putting 100% of your assets into equities to avoid extreme volatility is a good thing for money you might choose to access sooner rather than later (e.g. your ISA might be accessed before your late 50s, but your SIPP can't be). Over the long term a higher equity content would probably be expected to generate higher returns, and your daughter can't access her JISA money for 16 years while you can't touch the SIPP for a quarter of a century. However, if you have somewhat lumpy income from work and you have some life goals earlier than pension age, you might see a S&S ISA as something that might be raided earlier.

Would it be daft to have SIPP, S&S ISA and my daughter's JISA all invested in the same fund longer term?

Looking at each of the objectives on their own, if the fund is suitable for that objective then it doesn't matter that it also happens to be suitable for a different objective too and is being used elsewhere..

But if various different funds could all be appropriate for the objectives it doesn't hurt to use one for objective A and a different one for objective B just for curiosity / variety.

You might start off with using all the same fund (e.g. high risk) but then when you get within some arbitrary timescale of perhaps wanting to access the money (e.g. when your daughter is 8 and there is 10 years before she might want to raid her pot) you could change the fund used for that account to something else (e.g. medium risk), and if the platform does not have the best medium risk fund available in the market then change platform for that account at that point. Just an example.

Linton

The two alternative funds you have identified are very different yet you are now worrying about charges. You seem to be making your investment decisions the wrong way round.
A sensible approach is something like:
1 - define your objectives for the investment
2 - determine what high level asset allocation you need to meet the objectives.
3 - identify the fund or set of funds that would provide the allocation
4 - identify the best platform for holding your funds.

Charges appear as one of many considerations at stages 3 and 4.

Lokolo

Agree with Linton. You are looking at two different funds with two entirely different strategies, yet comparing platforms.

The investments should be decided first, and the platform to best suit them should be next.

https://www2.trustnet.com/Tools/ComparisonReport.aspx?typeCodesCF=FG1HD,FACDV&typeCodesUF=O:FG1HD,O:FACDV

Comparing those two funds. You can see they invest completely differently.

Secondly, you've only looked at HL and Vanguard. There are many other brokers available. Depending on your £, your strategy (are you investing monthly, once a year etc.) and your funds, that will determine which broker to go for.

dunstonh

HL is one of the most expensive platforms. Vanguard is one of the cheapest. HL is whole of market. Vanguard is very limited (to own brand).

So, you have pretty much picked two at opposite extremes but also very different.

The fund choice on each is strange as they are both very different in objective and risk.

fiisch

Thanks very much all - really helpful.


In all honesty, I was always intending to use the Vanguard Lifestrategy funds (100 for both ISA and SIPP), although Bowlhead's comments have made me seriously consider dialling down the risk on the ISA due to the likely shorter term nature and to reduce volatility across investments as a whole.


In terms of outlook, I am aiming with the ISA to build up a sizeable pot to try and take an income from in the distant future. I would say my outlook is at least 15+ years and I'm looking for a fairly high risk/potential reward fund. I have separate emergency personal savings and company funds to sustain me/draw upon for big emergencies.


I fear I may have listed the wrong HSBC fund - I have seen on here people mention this as a comparable alternative to Vanguard LS 100 when going through HL, I believe due to lower OCF fees (I'm sure someone mentioned it does not make sense to take Vanguard 100 through HL when HSBC XX is available for less) - any ideas?

Alexland

Probably HSBC FTSE All World fund which has both a lower OCF and lower declared internal transaction costs to VLS100. If sticking with HL you might also want to consider the discounted BlackRock Consensus 85 and 100 funds.

Prism

fiisch wrote: »

T
I fear I may have listed the wrong HSBC fund - I have seen on here people mention this as a comparable alternative to Vanguard LS 100 when going through HL, I believe due to lower OCF fees (I'm sure someone mentioned it does not make sense to take Vanguard 100 through HL when HSBC XX is available for less) - any ideas?

Maybe you were looking for HSBC Global Strategy Adventurous?

fiisch

Alexland wrote: »

Probably HSBC FTSE All World fund which has both a lower OCF and lower declared internal transaction costs to VLS100. If sticking with HL you might also want to consider the discounted BlackRock Consensus 85 and 100 funds.

That's the one - I think it may well have been you I was misquoting!

HSBC FTSE All World Fund has OCF of 0.19%, so through HL still a higher charge, but by a much smaller margin.

Doesn't seem to be much to choose between performance between Vanguard and HSBC over the past 3 years. I do like the idea of having SIPP and ISA in slightly different funds and through the same platform (having read Tim Hale's book, I am trying to stop checking weekly/daily!!), but then again Vanguard seems to be the default choice for many new investors on this forum.

Are there any other reasons to go for HSBC FTSE All World or Vanguard that I'm not considering? Almost seems to come down to a toss of a coin..!

dunstonh

Doesn't seem to be much to choose between performance between Vanguard and HSBC over the past 3 years.

Vanguard is returns focused. HSBC is risk targetted. Asset weightings are different.

but then again Vanguard seems to be the default choice for many new investors on this forum.

Marketing do its job well.

Thrugelmir

fiisch wrote: »

but then again Vanguard seems to be the default choice for many new investors on this forum.

Until the sector serially underperforms, and the herd moves onto the next investment fad. (Once everyone latched onto Buffett's investment style. The available investment options eventually dried up).