Comparison platform charges-Vanguard/IWEB

lindabea

I copied this from the IWEB site as their example of the charges for an ISA investment:

Farouk likes to invest in funds to get a bit of
variety, and opened a Share Dealing Account with
IWeb this year. He’s invested £1,000 each into
three different funds this year, each with its own
ongoing charges and transaction costs.
This year, if his funds don’t go up or down in
value, Farouk will pay:
Charge Amount
Account opening charge £25.00
Online trades
(3 trades at £5.00 each)
£15.00
Ongoing fund charge (1.11%) £11.10
Ongoing fund charge (1.19%) £11.90
Ongoing fund charge (0.86%) £8.60
Transaction costs (0.5% of
each investment)
£15.00
TOTAL £86.60

However, if you take the £3000 and invest in a VNG fund, the total platform charges at 0.15% would be £4,50. Now, if you take the IWEB example and make it as 1 trade, ignore the fund charge and the opening charge, the total amount would be £20.00.(inclusive of the trans costs at £15.00)

If IWEB comes out more expensive, I don't understand why it always comes out cheaper on comparison sites. I'd be grateful if someone can shed some explanation on this.

Tom99

There is a break even point. If the total invested was £10,000 then the Vanguard fee would also be £15 but if £50,000 was invested the vanguard fee would be £75.

Alexland

Assuming both offer the investment(s) you want (Vanguard and their friends) then the cost comparison depends on your account valuation, trade pattern and duration you hold the account (spread the iWeb setup fee over the expected duration, ignoring cost of money).

For a high value ISA account and/or infrequent trades iWeb is good. For a high value ISA account with regular or scheduled purchases then Halifax Share Dealing could be even better. For small account and/or frequent trades especially if contributing to multiple investment fund/etfs then Vanguard will be cheaper.

Do the maths on your own circumstances.

Alex

lindabea

Tom99 wrote: »

There is a break even point. If the total invested was £10,000 then the Vanguard fee would also be £15 but if £50,000 was invested the vanguard fee would be £75.

But £50000 invested with IWEB would make a charge of £255.00. (£5 trade and 0.5% on 50K. Still a lot more than the £75 with Vanguard.

foofi22

Remember you invest for multiple years

lindabea

After thought - if the trans cost of 0.5% is a one off cost at time of buying, than I can see my misunderstanding. I am assuming that the 0.5% is an annual charge which I suspect is wrong judging from your comments.

eskbanker

IWeb's reference to transaction costs of 0.5% is seemingly a broad brush (but inaccurate) estimate, but as these are always internal fund costs (as are the OCFs), they shouldn't feature in any comparative evaluation between platforms.

Discussed in another thread recently, I'll fish it out....

Edit: it's covered at https://forums.moneysavingexpert.com/discussion/6056583/s-s-isas-transaction-fees-cheap-platforms (ignore my misunderstanding in post #3 and head straight for posts #5 onwards!)

Alexland

Yup the only platform charges you need to consider when comparing iWeb to Vanguard for the same investment are the iWeb £25 setup then £5 per trade compared to Vanguard at 0.15% pa (assuming you aren't doing anything exotic such as live ETF trading on Vanguard).

lindabea

Thank you Alexland. So it looks like the example that IWEB give on their website is misleading- perhaps even doing them an injustice by saying that the total charge is £86.00. In fact, the actual cost to an investor after the initial charge is £5.00 for each additional 20K to an ISA. This makes a big difference when compared to the ongoing charge of 0.15% with Vanguard especially as the charge will be on any growth as well as the capital invested.

Thank you very much for putting all this into perspective.

eskbanker

lindabea wrote: »

So it looks like the example that IWEB give on their website is misleading- perhaps even doing them an injustice by saying that the total charge is £86.00.

Yes, the wording is poor and misleading; Farouk will pay the account opening charge of £25 and £5 per trade to IWeb, and he won't pay them anything else! He won't pay the other costs explicitly, they're just wrapped up in fund performance....

lindabea wrote: »

In fact, the actual cost to an investor after the initial charge is £5.00 for each additional 20K to an ISA.

£5 per trade, i.e. per purchase (or sale) of a fund, not per contribution paid into an ISA.

jimjames

lindabea wrote: »

After thought - if the trans cost of 0.5% is a one off cost at time of buying, than I can see my misunderstanding. I am assuming that the 0.5% is an annual charge which I suspect is wrong judging from your comments.

There is no 0.5% transaction cost, it's a fixed £5.

Year 2 onwards have no fees other than the fund costs