Halifax reg. saver v Investments??

cjn_2

EdInvestor wrote:

Hi oscar

When you put your money in one of their savings accounts, the bank pays you. When you give them your money to invest,you pay them.They put the money into a fund and charge you a fee for that.

The bank make their money in different ways on savings and investments, but they still make their money. Why should they want you to switch from savings to investments?

I had a similar situation when I went into the HSBC to open a regular saver. The financial advisor noted that I held a large amount in a Cash ISA and seemed very keen that I switched it into a tracker fund or suchlike. I'm still not clear why it mattered to them, as my ISA was held through them anyway.

ReportInvestor

cjn wrote:

The bank make their money in different ways on savings and investments, but they still make their money. Why should they want you to switch from savings to investments?

Hi cjn,

Competition in the UK savings and mortgage market has reduced interest rate spreads over the last few years - and this trend is further supported by economies of scale developed among some providers e.g. ING.

Unit trust charges, in contrast are edging up. The Mail on Sunday Business AND Personal Finance editors both condemned this trend today.

Lisa Buckingham (scroll down the article) - More economies of scale needed for US level lower charges

Jeff Prestridge - Why did M&G / Prudential have to follow the crowd and raise charges? High charges will scare off timid investors

A further reason for the banks' eagerness is the increasing disloyalty of the UK savings public - thanks to MSE :rotfl: . But if you can get someone into the stock market, you can count on 5+ years of charges because that is usually the minimum recommended investment term.

But don't worry. The HSBC advisor may still have your best interests at heart in trying to diversify your savings portfolio, since large cash deposits would leave you vulnerable to higher inflation or lower interest rates.

cjn_2

Thanks Report Invesor, that makes sense. Though presumably in time the better returns for banks on unit trusts will lead to competitive pressures bidding down the charges.

I do currently have £100 a month going into an L&G fund (Stocks & Shares ISA), £50pm into the UK (annual charge when I joined: 0.54%), £50 into the global (0.83%). These seem fairly modest charges, certainly compared to the 1.5% mentioned in the article.

The trouble with my Cash ISA is that I have exactly 15k, at which the rate is 5.25%. Drop slightly below and it drops to 4.85% (I think). Switching could perhaps get slightly more, but probably not 5.25%.

ReportInvestor

cjn wrote:

presumably in time the better returns for banks on unit trusts will lead to competitive pressures bidding down the charges.

That's the theory - if not the practice, and we live in hope. EdInvestor and I are also campaigning to get charges down because the industry won't on its own.

I'm a great fan of cash ISAs and you have your pot earning a decent rate of interest. I also like regular saving into the stock market to reduce risk - so it looks to me as if you have got yourself well organised with a decent basic savings pot and are in a position to increase your monthly savings into the stock market as & when your financial situation allows it.

So well done .

Although dh & financial advisers don't like trackers you have sensibly chosen low charge trackers (L&G UK Index has modestly beaten the average tracker over 3 years - +10% to June 2005 - and 7 years - +6% - because of its lower charges and the fact that it tracks the All Share Index, not just the top 100 companies).

You are also diversifying with the global fund, and you might see some gains over the next year from a falling £.