AJ Bell Fund Charges

EnglishDane

I have a SIPP with AJ Bell Youinvest and have recently gone into drawdown.  I plan to invest in the AJ Bell Funds. When purchasing, AJ Bell offers this option: "You can choose to include our dealing and other charges in the total cost of your investment or exclude them an pay them on top of the amount invested"
When investing in an investment fund is it best to have the charges deducted from the fund (thus reducing the value of the fund) or pay them separately (thus keeping the value of the fund)?
 

underground99

It depends how much you want to invest!    For example if they charge £1.50 to do a purchase, you have a choice to invest £1000 into fund shares and pay the £1.50 on top (so it will cost you £1001.50 to buy the fund shares but the shares you get are only worth £1000 ; or you could say you only want to spend £1000 including charges, so it will cost you £1000.00 but after they take the £1.50 charges you will only get shares worth £998.50.

So if you want to spend £1000 on fund shares excluding the charges you will need to give them £1001.50.   Whereas if you only want to give them £1000, you will get less than £1000-worth of shares.  It is not a case of 'what is best' it's a case of how much do you want to spend.   Over the long term, the shares should go up in value or generate income, so the more you are willing to invest, the more £ returns you should make.

Albermarle

Not exactly sure how A J Bell works but presumably if you were buying shares or Investment Trusts , the difference would be significantly more than £1.50 due to thr trading charge and  the 0.5% stamp duty  , so would make more of a difference, especially of the investment was thousands .

EnglishDane

Just to clarify.  I want to know how to pay the annual charge for the investment fund, not the transaction fees.  So for example for a fund of £50 000 with an annual charge (OCF) of 0.5% would incur a charge of £250.  I would like to know is it better to have the charge deducted from the fund or pay it separately from the fund.

ColdIron

The internal fee (OCF) will be deducted by the managers of the fund from the fund value. You don't need to do anything and cannot pay it separately from the fund

dunstonh

Just to clarify.  I want to know how to pay the annual charge for the investment fund, not the transaction fees.

Transaction charges are part of the annual fund charges.  They are separated from the OCF along with incidental charges but all three form part of the fund charges. i.e .OCF/TER + TC +IC= total fund annual fund charge.

You cannot pay fund charges separately.

eskbanker

EnglishDane said:

I have a SIPP with AJ Bell Youinvest and have recently gone into drawdown.  I plan to invest in the AJ Bell Funds. When purchasing, AJ Bell offers this option: "You can choose to include our dealing and other charges in the total cost of your investment or exclude them an pay them on top of the amount invested"
When investing in an investment fund is it best to have the charges deducted from the fund (thus reducing the value of the fund) or pay them separately (thus keeping the value of the fund)?

EnglishDane said:

Just to clarify.  I want to know how to pay the annual charge for the investment fund, not the transaction fees.  So for example for a fund of £50 000 with an annual charge (OCF) of 0.5% would incur a charge of £250.  I would like to know is it better to have the charge deducted from the fund or pay it separately from the fund.

Just to be clear, there are effectively three separate sets of charges, with those you actually need to pay being explained at https://www.youinvest.co.uk/sipp/charges-and-rates :

1. One-off dealing costs - £1.50 for buying funds, but buying shares, ETFs, etc, are more expensive and also incur 0.5% stamp duty
2. Annual custody charges - typically 0.25%, payable to AJ Bell monthly
3. Internal fund charges - these are the fund-specific costs explained by dunstonh above

In terms of making decisions about how to settle AJ Bell charges, you only need to consider 1 and 2, with 3 being taken care of by the fund manager.  It's generally best to maintain a cash balance to cover them, as they levy a charge to cover disinvestment costs if they need to sell units to pay your fees....

DavidT67

Buying ETFs does not incur stamp duty.

Monthly custody charges are capped on ETFs, but not on OEICs