Invested in wrong fund

Alexland

delpetra said:

Thanks for this -- could you expand on what you mean on "selling the fund down and reinvesting for the capped platform charges"? I thought it was a 0.25% fee on the first £250k of funds?

Yes but you probably wouldn't want to pay 0.25% on £250k at that would be £625 pa. Once the account is big enough by switching from a fund to an ETF they will cap at £3.50 pm (£42 pa). They charge more for adhoc ETF trades but if you are cunning and use their regular investment feature for one off scheduled ETF trades its the same £1.50 as fund buying.

bowlhead99

delpetra said:

Alexland said:

In your position I would probably do nothing and just wait a few years as with AJ Bell once the LISA gets big enough (after 3-4 years of £4k pa) it makes sense to sell the fund down and reinvest in ETFs/ITs for the capped platform charges. Still if you are obsessive enough that it bothers you it's only two lots of £1.50 and a bit of time out the market (when it could go up or down) to sell it down and rebuy the ACC units.

Thanks for this -- could you expand on what you mean on "selling the fund down and reinvesting for the capped platform charges"? I thought it was a 0.25% fee on the first £250k of funds?

It is a 0.25% custody fee on the first £250k of 'funds' where 'funds' means open ended funds (e.g. OEICs or unit trusts or PAIFs) held on their funds platform.  However, the LISA (and ISA) fees are capped at a much lower level than £250k in respect of any investments that are bought and sold on a stock exchange, such as ETFs (exchange-traded funds) or ITs (investment trusts).   Which is why he referred to 'reinvest in ETFs/ITs for the capped platform charges'; simply sell your open ended fund(s) and use a strategy of investing through ETFs or ITs instead, as the fee for holding those types of assets is lower than it is for holding open ended funds once you get to high values of assets.

Many ISA / LISA providers cap their annual account fees at a lower level when dealing with things that are bought and sold on a stock exchange because you do not need an open-ended fund platform infrastructure to do that, and the service is competing with any stockbroker who can place a trade on the London stock exchange.

Traditionally (i.e. going back decades), broking a deal for a buy or sell trade on a stock exchange is something that attracts a fee or commission for placing the trade but only incurs a nominal fee for maintaining the account (the broker hopes to earn enough from the transaction fees to make it worth their while), while an open-ended fund platform intermediary hopes to make their money from a percentage-based charge on the amount of assets hosted via their platform regardless of how many subscriptions or redemptions or corporate actions they need to handle on your behalf; in the old days they were paid a kickback by the investment fund themselves, funded from the fund management fees, but the FCA said it would be more transparent for that to be stopped and have the customers pay the platform direct.

These days there is more variation in fee structures from one provider to another, but major ISA and LISA providers such as HL and AJ Bell are examples of 'old school' models where you pay a percentage based platform custody fee for open-ended funds but have a higher transaction fee and capped percentage-based fee for exchange traded assets like ETFs, ITs and individual shares.