HL Fund charges am I missing something

trevjl

I have had a S&S ISA with HL for about 9 years. It started and still is to some extent a bit of a play thing with both funds and stocks and TBH is a bit all over the place. It has actually done OK and shows a half decent return (more luck than judgement!). As I near retirement I decided about time I had a sort out.
I always knew HL were expensive but wasn't too bothered about it as I liked the website, app and service. However, a recent thread, on here I think, got me looking more closely.
For my sins, I have held a few of their multi manager funds (yes I know!). I have read a few articles regarding the performances and also that they were expensive so I did some digging.
A useful bit on morning star.
 Based on investing £10,000 in this fund over a 5 years period with an expected return of 5%. The investment would be worth £11,102.65 and Total fees would be £1,407.13
If no fees were charged the Investment would be worth £12,762.82, this means your total return after fees is 11.03%

So if my basic 'O' level maths serves me, that is pretty dire. The HL charges are around 1.3% depending on which fund it is + I guess the 0.45% platform fee.
I also noticed that if I went to the individual funds that were shown as the top holdings in the multi manager fund, their individual charges were anything from 0.3% to around 0.7%
Is this as completely !!!!!! as I think it is or am I misreading it ?

Just to point out that this ISA plays no real part in my pension planning as I have enough in both DB & DC pensions.

masonic

You're not wrong about the funds being expensive, but the HL fund charge should include the management charges from the sub-funds, so it's "only" 1.75% + transaction costs. Morningstar's estimate of the impact of this on returns shows how important it is to control costs, because you pay fees on all of your capital, not just the growth. An expensive fund will tend to need to take more risk just to match the return of a cheaper fund, and so while high charges diminish returns in a growth period, they will magnify losses during a downturn.

There are cheaper options that wouldn't require you to move your ISA, just pick different funds. For example, HL caps management charges on ETFs and investment trusts. They are competitive for large portfolios if you avoid traditional open-ended funds.

dunstonh

So if my basic 'O' level maths serves me, that is pretty dire. The HL charges are around 1.3% depending on which fund it is + I guess the 0.45% platform fee.

For context, that is more than twice what our bottom line is for full advice.  So, you have been paying double for going DIY what you could have been paying for full advice.

If you are going to DIY, then the aim is to do it cheaper.  Not double the cost.

I also noticed that if I went to the individual funds that were shown as the top holdings in the multi manager fund, their individual charges were anything from 0.3% to around 0.7%

You ignore the charges of the underlying assets as you do not pay those.   the fund OCF and TC (dont forget TC) is what you pay and the underlying funds come out of that.

trevjl

the HL fund charge should include the management charges from the sub-funds, so it's "only" 1.75% + transaction costs

You ignore the charges of the underlying assets as you do not pay those.   the fund OCF and TC (dont forget TC) is what you pay and the underlying funds come out of that.

Thanks, yes I understand that, but in effect surely you are paying it even if not directly. HL are paying it and charging you the difference for their cut ?

masonic

trevjl said:

the HL fund charge should include the management charges from the sub-funds, so it's "only" 1.75% + transaction costs

You ignore the charges of the underlying assets as you do not pay those.   the fund OCF and TC (dont forget TC) is what you pay and the underlying funds come out of that.

Thanks, yes I understand that, but in effect surely you are paying it even if not directly. HL are paying it and charging you the difference for their cut ?

It's already included in the fund management fee of the HL fund. You are paying the sub-funds roughly 0.5% and the HL fund roughly 0.8%.

dunstonh

trevjl said:

the HL fund charge should include the management charges from the sub-funds, so it's "only" 1.75% + transaction costs

You ignore the charges of the underlying assets as you do not pay those.   the fund OCF and TC (dont forget TC) is what you pay and the underlying funds come out of that.

Thanks, yes I understand that, but in effect surely you are paying it even if not directly. HL are paying it and charging you the difference for their cut ?

That is why you look a the OCF and the TC together.    The cost of the underlying OCF/TC/IC may be discounted with fund of funds but it has to be reflected in the Fund of Funds charge.    

DireEmblem

Please double check this, but I believe HL platform fees are about to drop to 0.25% in the next tax year.

it makes them far more competitive with others, but once your balance grows to a sizeable amount - you may be better with a fixed fee provider such as Interactive Investor.

trevjl

As far as I have seen it's just LISA fees that are dropping and JISA fees doing away with altogether. I was going to move the grandkids JISA's elsewhere until I saw that.
I am not too bothered with the 0.45%, its more the charges on their funds I was questioning.

Alexland

trevjl said:

I am not too bothered with the 0.45%, its more the charges on their funds I was questioning.

I'd be bothered by all the charges. Paying HL a premium of circa 0.3% pa on the platform fee (basically 3x a good price of 0.15%) over the long term will mean they are getting around 10% more of an investment over a 30 year period and an even higher percentage of the investment return. You the investor are taking the most risk but are giving a lot of your return away which may have been less obvious during rising markets. High fee deductions can be particularly damaging when markets are low. Your contributions should be working for you not HL. Some of us are even paying a lot less than 0.15% on our platform fees.