interactive investor introduces free regular investing

jaybeetoo

Every little helps!

https://www.ii.co.uk/analysis-commentary/interactive-investor-introduces-free-regular-investing-ii510129

SonOf

We’re the first of the big investment platforms to scrap its regular investing fee, from 8 January 2020.

1 - are they really able to refer to themselves as big?
2 - how many platforms had a regular investing charge? - on the advice side, I cannot think of a single one. It may be prominent on the DIY side but doesn't seem likely to be commonplace.

masonic

It depends what you are buying. For most DIY platforms there is a trading fee for regular investing into shares/ETFs/investment trusts, but some of those platforms don't have a monthly subscription fee. Most platforms that don't charge a custody fee do charge for regular investing into open ended funds as well.

II is an odd halfway house where there is a flat subscription fee instead of ad valorem, but they retained elements of their pricing from when they charged no custody fee.

I considered it as free already at II, since for me it is usually funded from trading credit.

jaybeetoo

To quote ii

1. Today we are the No1 flat-fee investment platform with £30 billion of assets under administration, over 300,000 customers and more than one million users.

2. Hargreaves Lansdown charges nothing for regular investing into funds but does charge £1.50 per qualifying investment trusts, ETFs and FTSE 350 shares. Fidelity Personal Investing also charges £1.50 for investment trusts, shares and ETFs. Halifax Share Dealing charges £2 for shares, funds, investment trusts and ETFs, and Barclays charges £1 for “all automated regular investments”. AJ Bell, meanwhile, charges a £1.50 regular investing fee for both shares, funds, investment trusts and ETFs.

bowlhead99

SonOf wrote: »

2 - how many platforms had a regular investing charge? - on the advice side, I cannot think of a single one. It may be prominent on the DIY side but doesn't seem likely to be commonplace.

But on the advice side, how many of them are willing to bill you a flat fee of £120 to £240 a year for the core services of holding the assets on their platform? What is commonplace for the intermediary platforms, is to demand a percentage-based AUM charge - albeit with fee rate breaks at higher AUM values.

If they are going to charge you an AUM fee of 0.2 to 0.3% on £100-500k, they are getting £300-£1000+ a year for providing the platform services to the adviser (even though the adviser will be knowledgeable and savvy and not need much in the way of hand-holding or a lot of 'customer service' as he arranges for assets to be switched or held, because he knows what he is doing and has a good level of expectations of what can be done and what cannot).

Not surprising therefore that the intermediary platforms will be willing to let you have a bunch of annual transactions 'free' if they are already effectively getting a retainer of £300-£1000+ linked to the amount of assets they're holding.

On the DIY side, the providers have a variety of structures for buying and holding funds:

- You get the ones like HL which charge an AUM fee and as many 'free' fund trades as you like (akin to the intermediary model, but a higher percentage because they have to deal with a lot of laymen who need handholding, or simply because they can get away with a high fee when dealing with laymen who don't know the whole of the market and value the functionality and 'guidance' they provide).

- The ones like AJ Bell Youinvest which charge a smaller percentage of AUM fee, and a nominal per-trade charge for funds so that DIY investors don't take the mickey with daily trading.

- The ones like Interactive Investor or Halifax Sharedealing / Iweb who have a flat annual fee which won't increase if you have extra 000s on the end of your balance, but levy a more sizeable per-trade charge for funds once you've used up the few that they bundle into the annual fee.

With all of those DIY models for open ended funds, it's common for people who use the platform to drip-feed money into exchange-traded assets (ETFs, ITs, shares) as distinct from funds, to pay an incremental fee for each stock exchange-traded transaction; but a lower fee is typically available if those transactions are done on a 'bundled with everyone else' fixed monthly trade basis as a 'regular purchase'. So, it is indeed commonplace for a 'regular investing charge' to exist if the customer is using exchange-traded assets and the service provider needs to arrange for a deal to be brokered on a market, albeit on a monthly pooled basis with other customers.

Whereas on the open ended funds side (OEICs and UTs) you may only need to pay that 'regular investing charge' if their fee structure actually charges you incremental fees for fund transactions. So HL will not charge you an incremental fee for fund transactions (regular or ad hoc) because they are already creaming it in at 0.45% of fund AUM a year. III at the other end of the scale would charge you an incremental fee, because they are not getting a large percentage-based fee per year, but they would let you have it cheaper if it were regular pooled with others rather than ad hoc. In the middle you have AJ Bell who have a smaller AUM-based fee and a nominal fund purchase fee which is priced the same for regular or ad hoc.

It seems what II are now saying is that they are not going to bother charging you the 'regular investing' fee at all, even though they are not charging you an AUM-based percentage fee. Given the range of fee structures in the DIY market, it is not at all a surprise that they had such a fee before, and it was quite logical to have it, following the methodology set out above.

However, this is probably not the giveaway it sounds -because all of their fixed-rate fee plans have a certain amount of 'trading credit' per month bundled into them, and if you are the sort of person who is using the 'regular trading' feature to get the trades for a pound or two per pop, you quite possibly aren't using up all your credit anyway. So it is not a major giveaway if they let you have those regular trades - which are efficient, because they do them with everyone else on a fixed schedule and have economies of scale - for 'free'. So they can now say they genuinely let you have 'free' monthly trades for funds despite not charging you a hefty percentage-based AUM fund platform/custody fee.

stphnstevey

Not much of a game changer as still a £9.99 monthly fee

They were giving this monthly fee back as trading credit anyway. For those trading once monthly, it doesn't seem much better

As only one monthly fee across accounts, if you were paying for a SIPP or ISA, this maybe comparable

The different currency holding is helpful, but not the cheapest FX cost

II seem to like making there fee structure as complicated as possible....sure there is a little gremlin at II thinking up ways to try and confuse people

in_the_cracks

As somebody who left ii twice, it's always interesting to catch up with what they're doing now . If IWeb "went bad" (as a place to hold a large, rarely-traded ISA which includes open-ended funds), one thing I'd consider would be coming back to ii.

But when will they be introducing a free monthly netflix subscription?

hoc

Moved part of my portfolio from AJBell to ii and don't regret it. I see it more likely ii will get closer to AJBell's forex charge over time than AJBell implement features like multi currency holding and avoiding conversion to GBP every time at which time I'll move everything to ii.


This is a very small page from what has been happening in the US last few months of course. For UK I don't see this happening until fintech innovators like Starling disrupt from the outside. There just isn't the industry competition in the UK otherwise because rip off Britain isn't questioned or challenged.

IvanOpinion

I moved much of my portfoilio over to II at the start of last year to try to reduce costs (now saving almost £100 per month). I have been very impressed with their service both on the phone and through secure messaging. I also like the simplicity of their pricing model and web interface - very easy to see valuations.

While it will not affect me, it is nice to see them moving to remove even more fees from their offering - maybe by the time I retire they will be paying me to hold a pension with them (wishful thinking)

Albermarle

It could be the first visible reaction in the SIPP market to the 'threat' of the forthcoming Vanguard SIPP.

time I retire they will be paying me to hold a pension with them (wishful thinking)

A poster on another thread today said they had transferred to Fidelity, and got a £500 cash back .
They keep all their money in ETF's/shares/IT's so the annual charge is £45 and no charge for drawdown, withdrawals etc , so effectively a free lunch for 11 years .
So not quite paying you to hold your pension, but close .

Andy7856

Great news, I am in the process of moving to II, and a regular saving I can save the trading credit for adhoc lump sums. First impressions of II appear to be quite good. But end of the day will save 75% on my platform fees, which I will of course re-invest into the funds.