Alternatives to a monthLY fee OF £7.50 on Lifetime ISA

krissy08

Hello all,
I need help as £7.50 seems a bit high to pay monthly. So far I have invested the cash myself by buying units in Vanguard target retirement fund on the advise of a financial advisor. 
If I stop buying them will my fees reduce well I am not sure s I have incurred the fees because I bought funds , am I better off just letting them invest the funds in the ISA itself- I presume there is one?
I must say the funds I bought have done very well over the years but it would feel better if the fees were lower
I am with HL.

dunstonh

I need help as £7.50 seems a bit high to pay monthly

What is this £7.50 fee you are referring to?

If I stop buying them will my fees reduce 

You are not using an adviser (so it cant be that).  There are no initial charges (so it cant be that).  So, we really need to know what this £7.50 fee is.

am I better off just letting them invest the funds in the ISA itself- I presume there is one?

You said you are using the Vanguard TR fund.  So, you are letting them invest in the fund itself

Alexland

If the HL charge is £7.50 pm (£90 pa) then I assume you have an account valuation of £20k at 0.45%?

Or is the advisor charging you £7.50 per month?

At £20k you are getting to the point where it would be cheaper to switch to ETF(s) for capped charges and perhaps, if still under 40, to AJ Bell YouInvest where the capping is cheaper and the regular trade feature is more flexible. The only problem you will find is that the ETFs are not multi asset so it really depends if that reduced volatility is important to you. There are investment trusts where you would also get the capping however they tend to have higher fund management charges.

Ultimately the LISA market is not as competitive as the S&S ISA market so the platform charges are likely to be a bit higher however with capping as the account gets larger they become an ever decreasing percentage of the account valuation.

krissy08

dunstonh said:

I need help as £7.50 seems a bit high to pay monthly

What is this £7.50 fee you are referring to?

If I stop buying them will my fees reduce 

You are not using an adviser (so it cant be that).  There are no initial charges (so it cant be that).  So, we really need to know what this £7.50 fee is.

am I better off just letting them invest the funds in the ISA itself- I presume there is one?

You said you are using the Vanguard TR fund.  So, you are letting them invest in the fund itself

I just edited my post while you were replying. 
I am with Hargreaves Lansdown but have been buying Vanguard target retirement 2045 which I gather is a fund which incurs a 0.45% charge monthly

krissy08

Thank you both so much.
Am I better off investing the rest of my LISA in just regular shares which incur no fee (It won't stop me getting charged on what I have so far but may stem the tide. FYI; The charges appear to be on the value of the funds rather than the cost paid for it

ColdIron

Shares, investment trusts and ETFs are also charged at 0.45% but are capped at £45 which is £10,000. However you'll struggle to find an equivalent to the TR funds

Alexland

Yes HL charge their 0.45% on the current valuation not the purchase price.

https://www.hl.co.uk/investment-services/lifetime-isa/charges

They will cap their charges at £45 on 'shares' and by that they mean 'exchange traded assets' such as individual company shares, ETF funds and Investment Trusts. Your current VTR fund is a mix of stock market shares and fixed income bonds so investing in a global tracker ETF will be more volatile as it would be 100% in the stock market. Some investment trusts are lower risk but they have higher charges and individual company shares can be very risky.

We have our LISAs invested in an ETF for the capped charges but we moved from HL to AJ Bell as the capping was a bit cheaper and more importantly our trade costs worked out cheaper from sneaky use of the regular trading function. When moving to exchange traded assets you need to consider the total ongoing plus trade charges. You can only transfer to AJ Bell if still under 40.

krissy08

ok great sounds like a plan - I will look into AJ Bell in detail. Many thanks both for providing your insight. Much appreciated.

Alexland

krissy08 said:

ok great sounds like a plan - I will look into AJ Bell in detail. Many thanks for providing your insight. Much appreciated.

When doing the maths the key is to not pay the £9.95 adhoc trade cost but use the £1.50 monthly regular trade rate to invest the cash balance even if you cancel it after the first run each time. Also you would need to pick an ETF as ColdIron describes there is nothing comparable to your current VTR fund it would probably mean carrying more risk eg 50% drops when stock markets crash.

With 5 scheduled trades pa our LISAs cost £3.50x12 plus 5x£1.50 trades = £49.50 = £4.13 pm

Albermarle

krissy08 said:

Thank you both so much.
Am I better off investing the rest of my LISA in just regular shares which incur no fee (It won't stop me getting charged on what I have so far but may stem the tide. FYI; The charges appear to be on the value of the funds rather than the cost paid for it

As you seem a bit confused maybe this will help .
You are paying two charges .
The Vanguard TR fund has a  charge of 0.24%. However you do not directly see these charges, they are automatically taken out of the fund.
You are holding this fund in a S&S LISA on the HL platform . HL charge 0.45% for the admin buying and selling units and any tax issues etc .

The Vanguard fund is suitable for inexperienced investors. 
Buying individual shares is a different , and much riskier , ball game . ( also not free either , each purchase costs £12 with HL and there is 0.5% stamp duty to pay. )

In total you are paying 0.7% pa . This is not that bad . By changing investments and/or platform you can  reduce this % but maybe at the same time make some mistakes that will cost a lot more .

I suggest getting a better understanding of investments would be a good idea to do first , before changing too many things.

krissy08

Ah I was not clear on this nuance, as I can see I have less experience than others on here. Thank you