What's your drawdown percentage and how much of that do you spend on financial fees?

westv

Thrugelmir said:

Deleted_User said:

Thrugelmir said:

Deleted_User said:

Thrugelmir said:

Deleted_User said:

In the US brokerages have been offering no-commission trading for quite some time.  In August one of Canadian brokerages has joined them.  There is no “fee” for having the “platform” either.  https://www.nbc.ca/en/about-us/news/news-room/press-releases/2021/20210823-Premiere-canadienne-BNCD-annonce-sa-nouvelle-tarification-0-de-commission.html

Maybe a free U.k offering in a couple of years? 

Commissions and “platform fees” don’t cost a lot unless you are a frequent trader, but I find there are additional cost impacts.  X-O SIPP charges me 6 quid per trade.  I refuse to pay more than a fraction of 1% of the trade value which means dividends only get reinvested once a year.  Not a huge deal but the resulting losses do add up.

Payment for order flow is illegal in the UK fortunately.  

And in Canada. No stamp duty either. I can see the spreads on both Canadian and UK platforms. Overall, trading in Canada is cheaper.  Brokerages make money on cross selling services, be it banking, robo-advisors, currency exchange or lending.  Once you set up a platform the costs of supporting it are extremely low.  UK brokerages still seem to have a lot of fat and are running a little behind on adoption of low cost solutions. X-O is a much more basic and dated platform than what my Canadian and US brokerages have to offer. A lot less can be done without having to contact a human. Mind you, I still like their price offering for an over 100k portfolio vs UK competition. 

 I think Canada is benefiting from having a massive and highly competitive financial market next door.  Although ETFs were invented in Canada. 

And no-commission trading provides meaningful advantages for a passive investors in not having to wait for the trade to be large enough, so helping to stay 100% invested.  The other side of the coin is that it can incentivize frequent trading and dumb money but its not my problem. 

The bottom line is that zero cost trading doesn't exist. Just a mirage. Ultimately reduces the competition. Resulting in dominance by a select group.  

Not zero, but very cheap trading with zero commissions certainly exists for investors.  I’ve seen no evidence that it reduces competition. Guess it depends on how you define “competition”.  The service and pricing are more competitive than 10 years ago. Buying shares over the phone, paying lots for each trade and having paper certificates was fun but can’t say I miss any of it. 

Look at the consolidation of trading platforms in the UK over the past decade. Investment in technology is only warranted with scale. Platforms historically have made their profits by putting customers funds on overnight deposit. With overnight rates falling to paltry levels. Not the golden goose it once was. 

Downside of lack of paper certificates is receiving company circulars, annual accounts, being excluded from capital raising exercises, ability to attend AGM's easily. Nothing better to meet the company's management in person as a small investor. 

With the advent of robo trading smaller investors are at an increasing disadvantage in this globalised world. A reason I tend to do the majority of my investing by turning over stones in a rock pool. Than swimming in an ocean full of sharks. 

Does stagging still exist in any form? The last time I did any othat was in the 80s so I'm assuming that doesn't happen anymore as far as small investors are concerned.

HeyYeah

Maybe slightly off-topic, but this ft article/calculator says that

"In Britain, fund brochures tend to express a “total expense ratio”, usually between 1.25 and 1.75 per cent. The TER is a “poor guide to the full costs,” according to a paper issued last July by the UK’s Financial Services Consumer Panel, one of four statutory bodies that advise the Financial Conduct Authority."

Is there anyway to get a better understanding of the costs or to see how much you have actually paid in the last year? I'm looking at this at the moment for my funds and finding a lack of transparency.

[Deleted User]

HeyYeah said:

Is there anyway to get a better understanding of the costs or to see how much you have actually paid in the last year? I'm looking at this at the moment for my funds and finding a lack of transparency.

The bubbles in page 10 explain the nature of costs in addition to TER.  https://www.fs-cp.org.uk/sites/default/files/investment_discussion_paper_investment_cost_and_charges.pdf

Finding out all costs to a penny is nigh on impossible, unless you buy the actual stocks. But its possible to get a reasonable estimate of how much the 4 “layers” cost you per year.  Involves a lot of googling, spreadsheets, and potentially, talking to providers. 

Thrugelmir

westv said:

Thrugelmir said:

Deleted_User said:

Thrugelmir said:

Deleted_User said:

Thrugelmir said:

Deleted_User said:

In the US brokerages have been offering no-commission trading for quite some time.  In August one of Canadian brokerages has joined them.  There is no “fee” for having the “platform” either.  https://www.nbc.ca/en/about-us/news/news-room/press-releases/2021/20210823-Premiere-canadienne-BNCD-annonce-sa-nouvelle-tarification-0-de-commission.html

Maybe a free U.k offering in a couple of years? 

Commissions and “platform fees” don’t cost a lot unless you are a frequent trader, but I find there are additional cost impacts.  X-O SIPP charges me 6 quid per trade.  I refuse to pay more than a fraction of 1% of the trade value which means dividends only get reinvested once a year.  Not a huge deal but the resulting losses do add up.

Payment for order flow is illegal in the UK fortunately.  

And in Canada. No stamp duty either. I can see the spreads on both Canadian and UK platforms. Overall, trading in Canada is cheaper.  Brokerages make money on cross selling services, be it banking, robo-advisors, currency exchange or lending.  Once you set up a platform the costs of supporting it are extremely low.  UK brokerages still seem to have a lot of fat and are running a little behind on adoption of low cost solutions. X-O is a much more basic and dated platform than what my Canadian and US brokerages have to offer. A lot less can be done without having to contact a human. Mind you, I still like their price offering for an over 100k portfolio vs UK competition. 

 I think Canada is benefiting from having a massive and highly competitive financial market next door.  Although ETFs were invented in Canada. 

And no-commission trading provides meaningful advantages for a passive investors in not having to wait for the trade to be large enough, so helping to stay 100% invested.  The other side of the coin is that it can incentivize frequent trading and dumb money but its not my problem. 

The bottom line is that zero cost trading doesn't exist. Just a mirage. Ultimately reduces the competition. Resulting in dominance by a select group.  

Not zero, but very cheap trading with zero commissions certainly exists for investors.  I’ve seen no evidence that it reduces competition. Guess it depends on how you define “competition”.  The service and pricing are more competitive than 10 years ago. Buying shares over the phone, paying lots for each trade and having paper certificates was fun but can’t say I miss any of it. 

Look at the consolidation of trading platforms in the UK over the past decade. Investment in technology is only warranted with scale. Platforms historically have made their profits by putting customers funds on overnight deposit. With overnight rates falling to paltry levels. Not the golden goose it once was. 

Downside of lack of paper certificates is receiving company circulars, annual accounts, being excluded from capital raising exercises, ability to attend AGM's easily. Nothing better to meet the company's management in person as a small investor. 

With the advent of robo trading smaller investors are at an increasing disadvantage in this globalised world. A reason I tend to do the majority of my investing by turning over stones in a rock pool. Than swimming in an ocean full of sharks. 

Does stagging still exist in any form? The last time I did any othat was in the 80s so I'm assuming that doesn't happen anymore as far as small investors are concerned.

Primarybid has offered a number of opportunties to small investors. For far too long as a group we've been more or less excluded. With the increasing level of private equity, angel investing, institutional investing etc much of the best return is often made before a company comes to market. Often with loaded with debt as some investors reduce their holdings or exit entirely.  

JohnWinder

Might the report referred to not contain information about fees beside TER? https://www.fs-cp.org.uk/consumer-panel/products-and-services

has a link to the report. In which report are references to research into actual costs (often difficult to determine); one being

"FSA (September 2007) Good and poor practices in Key Features Documents” which found that only 15% of a sample of KFDs met consumers’ needs.
Some quotes:

1. The main reasons are simply that many costs are not properly measured or declared. Even fund managers frequently do not appear to know

1. around two-thirds of investment managers could not provide information on transaction costs

2. Even institutional investors of multi-billion pound pension funds may not know the full costs of investing...

   ...to find potential for significant savings in the Local Government Pension Scheme by switching to passive investments away from generally underperforming actively managed funds.

   1. The lack of competition in terms of price and costs stands in stark contrast to the intensity of competition between fund managers in terms of short-term performance, and the attendant emphasis on sales marketing and product proliferation.

   The metric used to judge performance is itself unreliable. Five-year performance figures, frequently used in sales and marketing, can be highly misleading

1. Frequent monitoring of short-term performance combined with inadequate scrutiny of costs encourages the practice of “closet indexation”...

   1. ...in mutual funds outside the United States. According to one estimate, around 30% of such assets are managed by closet trackers in the UK and elsewhere in Europe.

Overall, the complexities of retail fund structures, combined with weak fund governance and asymmetries of information and power between the retail investor and the investment manager, have resulted in an extremely unbalanced principal-agent relationship. Profit maximisation combined with incomplete disclosure and poor management of conflicts of interest has skewed the basis on which healthy competition depends.

green_man

Age 55
Retired 7 years but only just started drawdown of SIPP
Drawdown Percentage: 2.3%

Costs: Admin and Drawdown costs £270/year (<0.05%)
           Fund charges:  currently approx 0.22% but subject to change based on my fund balance.


The above drawdown is set at the most tax efficient level, this is more than enough for my normal requirements ( inc car/ holiday costs), however next year I will be looking at around 2.75% in order to provide some more funds to help my lad through Uni etc.

HeyYeah

JohnWinder said:

The main reasons are simply that many costs are not properly measured or declared. Even fund managers frequently do not appear to know

That was the sentence that caught my attention. Pretty shocking.

bostonerimus

Deleted_User said:

HeyYeah said:

Is there anyway to get a better understanding of the costs or to see how much you have actually paid in the last year? I'm looking at this at the moment for my funds and finding a lack of transparency.

The bubbles in page 10 explain the nature of costs in addition to TER.  https://www.fs-cp.org.uk/sites/default/files/investment_discussion_paper_investment_cost_and_charges.pdf

Finding out all costs to a penny is nigh on impossible, unless you buy the actual stocks. But its possible to get a reasonable estimate of how much the 4 “layers” cost you per year.  Involves a lot of googling, spreadsheets, and potentially, talking to providers. 

The p10 bubbles are useful. They mention pensions and they will have additional administration costs over funds that you own in ISAs or general investment accounts. It would be interesting to see how much more you pay in fees for your pension than your ISA. As many people are now doing drawdown I think it's vital to have an good idea of the total costs, including any IFA fees, so you can set a reasonable withdrawal rate. Withdrawing 0.5% or 1% too much, particularly early on, could have nasty consequences.

pip895

If you stick to investing in etfs shares and ITs then for HL (ignoring trade costs) its £0 for GIA, £45 for an ISA and £200 for a SIPP.

So for a large SIPP pretty inconsequential??

[Deleted User]

pip895 said:

If you stick to investing in etfs shares and ITs then for HL (ignoring trade costs) its £0 for GIA, £45 for an ISA and £200 for a SIPP.

Also, ETFs themselves may have costs/taxes which are not captured within TER.