Cheapest Lifetime ISA all world ETF

FIREmenow

Our LISAs are with AJ Bell, invested in HSBC FTSE All-World Index Fund C OEIC with ocf of 0.13%. Set up before Dodl existed with it's slightly cheaper fees. They are for retirement in our case, not house buying (guessing you are the same OP, if you're going 100%
 Equities).

As someone mentioned, not everyone accepts LISA transfers so that's something to check.

This is the AJ Bell/HL debate as I understand it, but it would be good if someone could confirm...

AJ Bell and HL  platform charge is 0.25% and both have similar £42/45 fee caps but only for shares/ETFs not funds. So you really need to be buying ETFs for a pot larger than £17k. Transferring a £30k pot from Dodl in (if allowed) would lead to more fees unless you move it all into ETFs first, otherwise you would be swapping 0.15% uncapped platform fees for 0.25% uncapped. That is the most important point, some extra points plus points of AJ Bell below.

Funds are £1.50 to trade at AJB and ETFs are £9.95 (dropping to £5 in April), you can reduce that for ETFs by using regular investing at £1.50 (set up then cancel after one transaction) from the cash balance in the LISA. We leave enough cash uninvested to cover for the fees so that they don't sell anything to pay them.

Funds are free to trade at HL and shares are 11.95, you can reduce that for ETFs as regular investing is free, BUT someone told me that the problem with HL is you can only set up a regular payment from external cash coming into the account, not from the cash balance, meaning you couldn't use a regular payment to invest the government bonus and would have to pay the 11.95 each time. You could trade the £4k cost-free if you remember to set up a regular payment before sending the money to the Lisa. Obviously this is multiplied if you want to buy more than one fund each year. HL pay amount 3% interest on cash balances at the moment, but AJ Bell don't.

So AJ Bell comes out ahead on pots over ~£17k due to the annual cost for two ETF deals of £3 versus £11.95, which is offset by AJ Bell's £3 lower platform charge cap.

If you are just starting out in Dodl then this is a problem for future you in a few years. For us, I wanted funds not ETFs, but we are at the £17k tipping point where we need to move from funds to ETFs to cap the fees in AJB and in hindsight I'd prefer not to have that minor faff and time out of the market, however brief! Dodl also has a restricted range of ETFs compared to the other two, so would also depend whether you can get what you want with them.

I've never had a HL account so don't know if the thing about regular payments is still true, but someone can probably confirm. And check if my workings-out are actuate!

Now I need to go pick an ETF.

sighup

Re. OEICs vs ETFs, I avoid OEICs because HL's charging structure compels a bias towards ETFs when a pot crosses the threshold where HL's platform charge plateaus for ETFs but keeps going for OEICs, etc.

My preference is for iShares Edge MSCI World Quality Factor UCITS ETF (Acc) IWFQ

I'm happy to expand on my rationale for IWFQ which has a 0.3% OCF, otherwise your usual sources of research info can be used to compare IWFQ with your preferred 'World' OEIC/ETF?

This is just my opinion and is not regulated advice. Although I only worked in FS IT, years of mandatory compliance training lead me to mention this

InvesterJones

sighup said:

My preference is for iShares Edge MSCI World Quality Factor UCITS ETF (Acc) IWFQ

I'm happy to expand on my rationale for IWFQ which has a 0.3% OCF, otherwise your usual sources of research info can be used to compare IWFQ with your preferred 'World' OEIC/ETF?

This is just my opinion and is not regulated advice. Although I only worked in FS IT, years of mandatory compliance training lead me to mention this

IWFQ is certainly not a cheap all-world fund like the OP was looking for. But if they are instead looking for factor investing and not a cheap all-world fund then it's worth considering if you want to track the MSCI World Sector Neutral Quality Index. It'll necessarily be more expensive and less diverse.

cloud_dog

@FIREmenow

Funds are free to trade at AJB...

AJB charges £1.50 to trade OEICs.

FIREmenow

cloud_dog said:

@FIREmenow

Funds are free to trade at AJB...

AJB charges £1.50 to trade OEICs.

Thanks, I've updated my post.

mugston

FIREmenow said:

£42/45 fee caps but only for shares/ETFs not funds. So you really need to be buying ETFs for a pot larger than £17k.
Now I need to go pick an ETF.

What ETF did you choose?

My initial choice (VWRL) is an ETF with a 0.22% annual fees.

HSBC FTSE ALL WORLD INDEX CLASS C is popular here, 0.13% fees, but it is classified as a fund, not an ETF, and so is not subject to charge capping.

For portion of the holdings below £16,500, FTSE costs 0.09% less PA

For portion of the holdings above £16,500, VWRL costs 0.16% less PA

Here are the workings for someone adding £5k including govt bonus yearly (incorrectly assuming a stagnant market for simplicity):

Comparing just the above two options, my total cost (given the platform charge of 0.25%) is:

Year 1: VWRL 0.47% or £23.50. FTSE 0.38% or £19

Year 2: VWRL 0.47% or £47. FTSE 0.38% or £38

Year 3: VWRL 0.47% or £70.5. FTSE 0.38% or £57

From here (when holdings are over £16,500) the platform fee for ETFs is fixed at £42

Year 4: VWRL 0.22%+£42 = £86. FTSE 0.38% or £76

Year 5: VWRL 0.22%+£42 = £97. FTSE 0.38% or £95

Year 6: VWRL 0.22%+£42 = £108. FTSE 0.38% or £114

Year 7: VWRL 0.22%+£42 = £119. FTSE 0.38% or £133

Year 8: VWRL 0.22%+£42 = £130. FTSE 0.38% or £152

It takes until the 8th year (until the fund value is almost £40k) for the ETF to come out on top (adding up all fees paid to date).

As I plan to add to my LISA for about 25 years, and the market will most likely appreciate, the ETF makes sense to me.

Other ways to make the investment more fee efficient:

1. Invest in a lower cost ETF. What do you all recommend? VEVE costs 0.12% but does not include emerging markets.

2. Is it possible to buy and sell inside the LISA? If so we should hold HSBC FTSE ALL WORLD INDEX CLASS C until it reaches roughly £20k, then sell it and buy VWRL with it.

Edit: I have not included DODL in this comparison, as it is only available to customers who are solely a citizen of UK, which I do not satisfy.

gravel_2

It does not appear to be available to retail yet but if it comes available I'll probably pile into Amundi Prime All Country World (WEBK) @ 0.07% fee.

ChesterDog

There's also the possibility/probability that charges will change over time.

Ciprico

We went with SWLD (etf) on HL.

I'm expecting the fees to be capped at £45 per year, plus two purchase fees, one for initial deposit and second for the govnmts deposit. There may be some slightly cheaper, but the above was easy to setup and easy to manage.

As far as I know HL don't offer and low cost regular purchase schemes, which is a shame...

ColdIron

Ciprico said:

As far as I know HL don't offer and low cost regular purchase schemes, which is a shame...

£0 via Direct Debit with Monthly Savings, you can turn it off as soon as you want. It won't help you with the government top up but halfway there

• You can set up a Direct Debit from £25 per month. There’s no charge for a Direct Debit into funds, shares and selected investment trusts and exchange-traded funds (ETFs).

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