ISA transfer blocked by fund classes

Paul_Redwood

Just reviewed the note below from ATS concerning a transfer from HL. I'm concerned at funds having 'different classes' being used as a way to obscure charging regimes and frustrate transfers. Ideas for how to manage this without being stung for yet more charges?

ATS:
The 2 investments you have [in HL] which we do not hold are the following funds:
Lindsell Train Global Equity D IE00BJSPMJ28
Legal & General US Index Trust C Class Accumulation GB00BG0QPL51

These are not in 'clean' share classes, which are the only type that we do hold.
The nearest ones we do hold are the following:
7GGLOE LINDSELL TRAIN LTD LINDSELL TRAIN GLOBAL EQUITY INST B IE00B3NS4D25
LGUTII LEGAL & GENERAL UT US INDEX TRUST I DIS GB00B0CNGS66

Therefore, in order to transfer in-specie, you will need to convert the Lindsell Train fund from the 'D' class shares to the 'B' class, and the L&G fund from the 'C' class to the 'I' class shares. These are the clean versions which we do hold, and we will be able to transfer all investments once these have been switched.

Linton

Funds normally do have multiple classes at different charging rates. For example one class would be if you bought the fund directly from the fund manager which would give rise to higher costs to cover customer support than if it was done via a broker. Another could be for a broker who had arranged a bulk discount and would not be available to another broker who hadnt.


So if you want to transfer the HL classed funds to ATS you will have to use the classes available to ATS. Or you could sell the funds with HL and transfer the cash.

SonOf

I'm concerned at funds having 'different classes' being used as a way to obscure charging regimes and frustrate transfers.

Potentially the former. Not at all the latter.

HL are not the biggest issuer of super clean but they do have a fair number. Ironically, the UK's largest platform has virtually no superclean share classes on it. So, its not all about size (assets under management). Although that was always the argument to have super clean.

londoninvestor

The FCA have mentioned this as an issue of concern - but I wouldn't delay your transfer until they act!

https://www.langcatfinancial.co.uk/2019/03/brexit-game-of-thrones-and-the-investment-platforms-market-study-and-you/

lang_cat wrote:

First up in the CP are proposed rules to force the ceding platform to make it easier for clients to re-register to another provider. This is especially relevant where the platform holds a discounted (“superclean”) share class that the other provider might not have access to. In these instances it will be up to the ceding platform to convert the client, free of charge into a share class that can be re-registered. The CP has a few questions about this, and there are complexities to be worked through, however the FCA are proposing draft handbook text and an implementation date of 31st July 2020, so it’s clear they are expecting this one to happen.

masonic

Paul_Redwood wrote: »

The 2 investments you have [in HL] which we do not hold are the following funds:
Lindsell Train Global Equity D IE00BJSPMJ28
Legal & General US Index Trust C Class Accumulation GB00BG0QPL51

<snip>

Therefore, in order to transfer in-specie, you will need to convert the Lindsell Train fund from the 'D' class shares to the 'B' class, and the L&G fund from the 'C' class to the 'I' class shares. These are the clean versions which we do hold, and we will be able to transfer all investments once these have been switched.

It's unlikely HL will do this conversion for you as these are not unit classes it offers as standard. Even if it did agree to action a conversion, this could slow your transfer down by a couple of months. The second fund is just a US index tracker and there are plenty of those, so pick one that has the same unit class available on both platforms and switch into that. For LTGE, you might just need to switch to a broadly similar fund temporarily for the purposes of the switch. This will prevent you being out of the market, though you'll obviously have a period where you won't get the benefit of any outperformance of LTGE.