Switching Stocks & Shares ISA - Cash or Shares?

GaryMac5

Hi folks,

Been reading a lot of things on the forum the last few weeks as I'm trying to get my financial house in order for 2021, so to speak. Super helpful info so far.

I did have a question though that I haven't been able to find a previous thread for (apologies if one exists):

When moving a Stocks and Shares ISA from one provider (Bank of Scotland) to another (I think I've chosen Interactive Investor based on researching them/iWeb/HL etc.) am I transferring the shares I currently own, or are they sold on transfer and its the cash equivalent that gets transferred for future investing in the new funds I choose with II? Is that even a choice I have to make (and if so what would be the considerations), is it automagic, or does it depend on the start/end provider policy?

I started my Stocks & Shares ISA with HBOS in 2007, in branch, contributing a regular sum and cashed it out in 2018 after being made redundant, but I've kept the regular payment going since then to start building up again. It's performed really poorly since 2018 (lost money against investment) and though I'm comfortable that can happen and I'm in it for the long term (15 year minimum outlook) it has prompted me to actually try and find out more for myself about investing and led me to conclude that having a bank policy isn't optimal. With only 3 years of exposure it probably isn't a bad time to "do it better", I'm just not sure (and cant find out) what "transfer" actually means!

Any help for a learning noob greatly appreciated!

eskbanker

If the investments you currently hold are all offered by your chosen new platform then you can choose to transfer them in specie, which basically means not selling first - this keeps things simple and means you're not out of the market when transferring, but will usually take longer than transferring via cash.  Selling up first is your only option if the investments aren't available at your new provider....

What are you currently invested in that's lost money since 2018?

GaryMac5

eskbanker said:

If the investments you currently hold are all offered by your chosen new platform then you can choose to transfer them in specie, which basically means not selling first - this keeps things simple and means you're not out of the market when transferring, but will usually take longer than transferring via cash.  Selling up first is your only option if the investments aren't available at your new provider....

What are you currently invested in that's lost money since 2018?

Thanks eskbanker, much appreciated.

I suspect I won't be able to transfer the shares in that case as the funds are HBOS (Scottish Widows seem to run it for them) specific. Can't find anything on trustnet that looks like the fund I see online with HBOS or on recent paperwork sent.

I can't post the link i have to /kiids-hbos on scottishwidows as still too new a member, which is pretty much all I can find.

I'm currently in whatever one of their profiles gets: Corp Bond Fund share class C, International growth fund class f, small companies class f, special situations class f, uk equity income class f and uk growth class f.

Since 2018 I've put in £9250 and today its valued at £9230, £20 less than I invested at a time all the other funds im looking at have made 7-8%, all for the low price of 1.6%.

I'm only starting to learn about what it all means and what I should be doing and I still have time on my side, so thats a bonus. I was sold this fund 15 years ago by a bank advisor as that's the only place I knew to ask and it did OK for me up to 2018 in the sense I had it in a difficult spot. But seems its not the best choice! I'll take that on the chin as a learning experience! 

Alexland

With under £10k why would you want to pay Interactive Investor at least £120 pa in fixed charges? That's a platform fee of over 1.2% compared to Vanguard Investor at only 0.15% pa or Fidelity (who would give you similar whole market choice) for 0.35% with no trade fees if you stick to funds. II charges are intended for customers with much higher account valuations.

GaryMac5

Alexland said:

With under £10k why would you want to pay Interactive Investor at least £120 pa in fixed charges? That's a platform fee of over 1.2% compared to Vanguard Investor at only 0.15% pa or Fidelity (who would give you similar whole market choice) for 0.35% with no trade fees if you stick to funds. II charges are intended for customers with much higher account valuations.

Thanks for the feedback Alexland.

It is one of the other things I have been trying to figure out as part of what I'm doing. I've been looking at all of the options (HL, II etc.) the last few weeks (probably longer!) trying to get my head around it all and educate myself a bit but there's a ton of stuff to figure out.

My logic for choosing II, to hopefully explain:

I have just under 10k in the S&S ISA at the moment, but switching it and making my savings more efficient is part of a wider overall plan. I also have £30k in a current account earning nothing (10 years worth of putting a little bit away as well as the investment money which I know now wasn't the best choice!) which I plan to use to top up to my full 2020 allowance as a lump sum prior to April deadline once the new account is opened and then drip feed the rest in next year to (hopefully) the full allowance again, moving it all into investments (while using income to build up a smaller cash reserve again).

I think once I get to ~£40k, which will be a maximum of 14-16 months, I'll be cheaper with II at that fixed rate than any of the competitors (other than perhaps iWeb). But as I say I'm figuring this all out for the first time so more than happy for advice from you guys if I'm making a mess of it (again!). I've used a lot of that advice from other threads already and it's been invaluable to me so far.

Further info: Having read on here, trustweb, monevator and a few other places I plan to invest in 3 funds initially: VLS60, HSBC Global Balanced and either BlackRock MyMap or BG Managed (to differing degrees) to get the balance of global asset classes I think I want based on all my reading. II offer all of those, which I can add over 3 months with my 1 free trade a month, which is another part of the logic in leaving towards choosing them.

My thinking is I want to set up a new account that I hopefully don't need to move again in future, I can just rebalance the portfolio if needed over the next 15-18 years and not pay really high fees for it as it grows.

I had narrowed it down to HL or II, in the end thinking II was better purely on the fees over the length of time given how I hope it will grow.

I have very much joined all those dots myself though through reading on here and in other places and I'm absolutely aware I'm a complete novice with this so please do tell me if any of that sounds daft, it's a lot to get my head around! 🙂

Apologies if TL/DR 🙂

Alexland

Yes the breakeven point for II to be cheaper than regularly investing in a fund with a whole market platform such as Fidelity, CSD or AJB would be around £40k. HL are more expensive at 0.45% so the breakeven point against II would be around £30k. Vanguard would be £80k.
Still do you really want to pay the higher II fee now rather than let the fee ramp up gradually until it's then worth transferring?
We have iWeb accounts and even if we traded each month it would be £60 so half the cost of II (so the £100 setup would break even after nearly 2 years).
Also worth considering if you really need 3 similar funds for £40k or you could just pick your favourite preferably one offered by iWeb or Vanguard.

GaryMac5

Alexland said:

Yes the breakeven point for II to be cheaper than regularly investing in a fund with a whole market platform such as Fidelity, CSD or AJB would be around £40k. HL are more expensive at 0.45% so the breakeven point against II would be around £30k. Vanguard would be £80k.
Still do you really want to pay the higher II fee now rather than let the fee ramp up gradually until it's then worth transferring?
We have iWeb accounts and even if we traded each month it would be £60 so half the cost of II (so the £100 setup would break even after nearly 2 years).
Also worth considering if you really need 3 similar funds for £40k or you could just pick your favourite preferably one offered by iWeb or Vanguard.

Thanks again Alexland.

The reason I had discounted iWeb was that I thought they were more expensive for a regular investor looking to drip feed than II or HL, looking at their charges explained PDF? They don't mention anywhere that regular investing into funds incurs no cost and the examples on their PDF (Faruk the Fund Fan) show that there's a 0.5% "transaction cost for each investment" on top of the £5 fee for selecting the fund initially and the ongoing fund charge.

On that basis it looked like the charges would be higher than HL and II,  before including the £100 opening costs or £5 per trade.

Unless of course II and HL charge that same transaction cost every month when paying into a fund already selected and I just haven't found it listed anywhere in their charge sheets, or I'm completely misunderstanding what the iWeb charge structure is, both of which are likely? 

I had it written down as:
iWeb: £100 upfront, £5 per trade including initial fund setup, 0.5% of every months investment, ongoing fund charges for each individual fund (set by the fund).
II: £9.99 per month, Free trade if only doing 1 per month and free regular investment, ongoing fund charges for each individual fund (set by the fund)

For ease of numbers, for £1000 a month regular investment into 1 fund in year 1 that would then be:

iWeb: £100 + ((£1000*0.05)*12=) + £5 = £705 before fund management charges
II: £9.99*12=£119.88 before fund management charges

Admittedly, that doesn't look right typed out and its most likely I have completely misunderstood that transaction cost for each investment on iWebs blurb and I'd be paying that with II too, without finding it in their charging blurb.

Learning is fun.

eskbanker

IWeb's reference to 0.5% transaction costs has caused plenty of confusion before - it's intended to represent a typical internal cost of fund management, rather than something separately charged to the investor, but most funds will incur lower costs than this, and, more to the point, the cost, being internal to the fund itself, would be the same on any platform.

Such transaction costs relate to the impact of buying and selling investments within each fund, and can be estimated in advance but aren't actually known until after the event - it would be helpful if they were represented in a consistent way alongside the OCF figures but for whatever reason this hasn't happened....

P.S. You had the decimal point in the wrong place in your above calculation (5% instead of 0.5%) so, excluding fund costs, the IWeb year 1 cost would be £160 (year 2 onwards £60) versus the II £119.88, hence Alexland's comment that IWeb would be cheaper than II after less than two years if transacting monthly.

Alexland

Ignore the 0.5% it's just iWeb's confusing example of the cost that could be incurred by either a dual priced fund or a fund with a dilution adjutment. Whatever the policy of the fund manager in ensuring the existing investors are not bearing the costs of others who frequently switch in and out of the fund would be the same on any platform. iWeb do not themselves charge the 0.5%. Regular investing on iWeb is not free it's just a standard £5 trade so £60 per year if using one investment.

• Over 2 years II would be £9.99 x 24 = £239.76 and iWeb would be £100 + (£5 x 24)= £220
• Over 5 years II would be £9.99 x 60 = £599.40 and iWeb would be £100 + (£5 x 60)= £400

GaryMac5

@eskbanker & @Alexland

Thanks guys, really appreciate that info, that helps me massively.

Think I've got it now. Essentially, if I choose one fund and regularly invest every month then iWeb is going to be cheaper in the long run. If I am going to choose 2 funds and regularly invest every month, then they are essentially the same price in the long run (not counting the £100 initial fee for iWeb) due to II not charging for regular investments when iWeb treat them as a trade and any more than 2 funds then II would be cheaper in the long run.

The 0.5% (or whatever it ends up being) I'm going to incur anywhere, that is a fund charge that the iWeb docs had me confused over.

Now I need to have a think about the funds choice again and decide on that basis if its one ore do I really want/need more than that (point taken that I could just pick one). I'll think on that again.

I had spent ages narrowing them down to 4 (VLS60 and HSBC Global then either BR MyMap or BG Global) and trying to figure out what one was best, then saw on here others saying they were in 2 or 3. I think, not knowing anywhere near enough about this stuff, it felt "safer" taking on 2 or 3 but I was probably just rationalising that to myself!

Oh and good spot on the decimal point - I better not do that too often or all this work could be spoiled!!!

Thanks for all your help so far both, really appreciated.