ii vs Hargreaves Lansdown OCR Fees

ray4221

Various posts on this forum discuss the high platform fees of HL so I decided I needed to move my ISAs.  BUT comparing the OCR fees of my HL funds the majority ii offer are higher than HL for exactly the same class of fund.

For example: Artemis Income Class I - Accumulation.  The OCR HL indicate is 0.59%. The OCR for ii is 0.80% but then ii add a little bit more to give an overall product cost of 0.96%.

I realise the OCR is not a fee I pay directly but surely it affects any return I get?

I have compared all the product costs ii 'charge' against what HL 'charge' and the additional return from the fund over all my investments exceed the platform fees.

So yes I am paying higher platform fees to HL but the lower OCR's are actually giving me a slightly greater return on my funds and overall negates HL platform fees, (aside from the fact ii charge £7.99 to buy & sell funds). By my calculation overall ii would actually appear more expensive - by quote a lot?

Does anyone understand what I am going on about and provide some clarity?

grumiofoundation

That fund has a 0.21% ongoing saving from HL. Not all funds will have an ongoing saving.

II is better for higher balances as it has a flat fee, not % based a la HL. 



https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/a/artemis-income-class-i-accumulation

eskbanker

ray4221 said:

For example: Artemis Income Class I - Accumulation.  The OCR HL indicate is 0.59%. The OCR for ii is 0.80% but then ii add a little bit more to give an overall product cost of 0.96%.

I realise the OCR is not a fee I pay directly but surely it affects any return I get?

The 'little bit more' that II add (internal transaction costs, etc) will also apply to HL, even though the latter chooses not to disclose it in such an obvious way (if at all), so if you're going to add that 0.16% to the II side of your cost equation, you should add it to the HL side too....

dunstonh

BUT comparing the OCR fees of my HL funds the majority ii offer are higher than HL for exactly the same class of fund.

the fund charges are identical across all platforms when it is the same share class.

For example: Artemis Income Class I - Accumulation.  The OCR HL indicate is 0.59%. The OCR for ii is 0.80% but then ii add a little bit more to give an overall product cost of 0.96%.

The OCF is just one part of the overall fund charge.  You need to add on TC & IC.   It is a mandatory disclosure requirement to show all aspects of the charge and not just the OCF.  Although most investors tend to ignore TC&IC and focus on the OCF.

Using 30/04/21 it has an OCF charge of 0.80% and TC of 0.16% and IC of 0.00% = 0.96% bottom line.

Small differences are down to different snapshot dates used by the platform.   (for example the OCF was 0.82% in July 2020 snapshots. not all snapshot dates are the same)

II are more transparent on their charges disclosure in my opinion as they are showing the complete breakdown but I cannot see any reference to TC&IC with HL 

On the other hand, HL is rebating 0.21% of the fund charge.  So, this effectively brings their platform charge down from 0.45% to 0.24% for the amount allocated to that fund.  However, the fund charge is the same as ii.  So, if II charge less than 0.24% you are cheaper with II.  If they charge more than 0.24% you are cheaper with HL.

ray4221

Thank you...  So HL are also adding a  'little bit more' which typically will make the overall 'Product Fee' identical?

eskbanker

ray4221 said:

Thank you...  So HL are also adding a  'little bit more' which typically will make the overall 'Product Fee' identical?

Neither II nor HL are actually adding it as such, but the underlying internal fund costs are the same for both platforms, ignoring the HL discount.

ray4221

So HL are just not being transparent about the internal fund costs? because for the same class of fund the charges are exactly the same, aside from any rebate HL may gave back?

eskbanker

ray4221 said:

So HL are just not being transparent about the internal fund costs? because for the same class of fund the charges are exactly the same, aside from any rebate HL may gave back?

Yes, exactly.

ray4221

dunstonh said:

BUT comparing the OCR fees of my HL funds the majority ii offer are higher than HL for exactly the same class of fund.

the fund charges are identical across all platforms when it is the same share class.

For example: Artemis Income Class I - Accumulation.  The OCR HL indicate is 0.59%. The OCR for ii is 0.80% but then ii add a little bit more to give an overall product cost of 0.96%.

The OCF is just one part of the overall fund charge.  You need to add on TC & IC.   It is a mandatory disclosure requirement to show all aspects of the charge and not just the OCF.  Although most investors tend to ignore TC&IC and focus on the OCF.

Using 30/04/21 it has an OCF charge of 0.80% and TC of 0.16% and IC of 0.00% = 0.96% bottom line.

Small differences are down to different snapshot dates used by the platform.   (for example the OCF was 0.82% in July 2020 snapshots. not all snapshot dates are the same)

II are more transparent on their charges disclosure in my opinion as they are showing the complete breakdown but I cannot see any reference to TC&IC with HL 

On the other hand, HL is rebating 0.21% of the fund charge.  So, this effectively brings their platform charge down from 0.45% to 0.24% for the amount allocated to that fund.  However, the fund charge is the same as ii.  So, if II charge less than 0.24% you are cheaper with II.  If they charge more than 0.24% you are cheaper with HL.

Ok that has clarified most of it.  I have just called HL to ask where I can find the Cost Disclosure Document but they didn't know what I was talking about.

The key is the 'Ex-Ante' cost (0.16%) What is it and as you said it will apply to ii as well as HL?

dunstonh

The key is the 'Ex-Ante' cost (0.16%) What is it and as you said it will apply to ii as well as HL?

TC & IC are EU directive creations.  They are not explicit charges you pay but relate to charges the fund pays within it.   For example dealing costs. Or if it was a property fund, they pay for maintenance of the property.   This are paid out of the fund and historically created a drag on the rate of return.   However, the directive tells fund houses to disclose those costs and show them as a pro-rata charge against the investors.   Ex ante is a prediction of their charges for the year ahead and ex-post is disclosure for them for the year behind. ex-ante disclosure is required to be issued pre-sale/transaction.    You get the ex-post charges disclosure once a year from the platform.

Irrespective of the platform you use.  The same fund share class has identical OCF, TC & IC across the board.  The rate of return will be identical.   The charges will be identical.

What HL is saying is they will effectively reduce their platform charge by 0.21% if you buy that fund (for the amount allocated to that fund).  It will still have the same OCF, same TC and same IC.     

OCF, TC & IC are collected internally within the fund and reflected in the unit price of the fund.  

Ok that has clarified most of it.  I have just called HL to ask where I can find the Cost Disclosure Document but they didn't know what I was talking about.

When providers/platforms/advisers create their websites and documentation, they have different ways of doing it.  The EU directive also allows different methods.  And there is a minimum standard and best practice.   So, you u get these differences in disclosure.   

HL is compliant as it gives an example on its costs tab:

However, I personally do not like that example as it does not display the TC & IC in percentage terms despite showing their net OCF in percentage terms.  In my opinion, it would be better to display all the charges the same way throughout the table.    Not do a couple of the charges in percentage and show a blank for the rest.    I would argue it can lead to a misconception that you are paying less for that fund than elsewhere.   And you make a good example of that  You didn't know what TC&IC was.  You were comparing HL and their OCF but no TC&IC against II with OCF, TC&IC combined.

ray4221

Does this also hold true for Investment Trusts?

And there is a huge difference in the HL Multi-Manager Income & Growth Trust where both companies give an OCR of 1.24% but ii give a product cost of 6.48% - This seems a very deceptive way of indicating fees?