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    • Richardx46
    • By Richardx46 13th May 19, 4:22 PM
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    Richardx46
    ISA fund hidden charges
    • #1
    • 13th May 19, 4:22 PM
    ISA fund hidden charges 13th May 19 at 4:22 PM
    I have an HSBC selected investment fund ISA currently worth around 15,000. Had it for nearly 20 years. They send me a statement every quarter with current value and charges taken. Usually about 9 a quarter charges. HSBC now just written to me revealing that in fact they have been taking more like 40 a quarter in charges. The other 30 has been taken from the fund before the figures on the statements are generated and hence I have been unaware of them.

    I presume new disclosure legislation has forced their hand? I am wondering if I would have a case to reclaim charges that where never notified to me? I might have put this money elsewhere if I had been informed of the real costs.
    Thanks for any comments.
Page 1
    • dunstonh
    • By dunstonh 13th May 19, 5:08 PM
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    dunstonh
    • #2
    • 13th May 19, 5:08 PM
    • #2
    • 13th May 19, 5:08 PM
    I presume new disclosure legislation has forced their hand?
    A new EU directive came in during 2018. It is a pretty flawed directive in places and one of those flaws is around charges. In particular, the transaction charges column.

    I am wondering if I would have a case to reclaim charges that where never notified to me?
    none whatsoever.

    I might have put this money elsewhere if I had been informed of the real costs.
    They are not the real costs. Which is part of the problem.

    The transaction charges column are charges that are incurred by the fund in holding and transacting in assets. You are not directly paying those, unlike the OCF which you are. The fund is paying them and they this is your share of the costs. It also includes an element of profit and loss (which is not a charge but that is what the EU wanted).

    Some assets incur more costs than others. A fund including property would have maintenance costs for example. Those costs have always been there but now you are shown your share of those costs. Whereas in reality, you need those costs to be able to get the investment returns. Funds that have higher private equity levels have higher costs as well as those that provide management and support to companies to help them grow. Those now show as a cost.

    Because of this, whilst it is a compliance requirement to show the figures, the OCF is still the most reliable to use. You can largely disregard the transaction charges column. The incidental charges column is nil for most people.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Richardx46
    • By Richardx46 13th May 19, 5:23 PM
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    Richardx46
    • #3
    • 13th May 19, 5:23 PM
    • #3
    • 13th May 19, 5:23 PM
    Thanks for that but it appears that it is the transaction charges that have been shown on my statements. The larger amount =the Ongoing Charge Figure is the charge that I not been given until now.
    Last edited by Richardx46; 13-05-2019 at 5:25 PM.
    • dunstonh
    • By dunstonh 13th May 19, 5:33 PM
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    dunstonh
    • #4
    • 13th May 19, 5:33 PM
    • #4
    • 13th May 19, 5:33 PM
    Thanks for that but it appears that it is the transaction charges that have been shown on my statements. The larger amount =the Ongoing Charge Figure is the charge that I not been given until now.
    Originally posted by Richardx46
    Transaction charges are a new disclosure and did not appear before 2018. OCF replaced TER in 2015. TER replaced AMC before that.

    Noting that the term "transaction charges" at fund level may mean something different to transaction charges levied at product level. Keen to avoid terminology issues but most providers that used the "transaction charges" name for other things have renamed them to avoid confusion.

    As you have held yours for 20 years, you would never have been told the OCF or the TER. It would have been AMC only back then. The others didnt exist.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Richardx46
    • By Richardx46 13th May 19, 6:06 PM
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    Richardx46
    • #5
    • 13th May 19, 6:06 PM
    • #5
    • 13th May 19, 6:06 PM
    Thanks @dunstoph. All I understand is that I have never been informed of the Ongoing Charge figure which you said I was directly paying. If I have been directly paying it surely it should have been on my statements?


    The letter I have just received says ongoing charges where 30 for a three month period. I have never seen anything like that on my statements before.



    My statements use non of these acronyms they just list charges to my fund as 'Fees'
    Last edited by Richardx46; 13-05-2019 at 6:09 PM.
    • dunstonh
    • By dunstonh 13th May 19, 6:43 PM
    • 98,597 Posts
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    dunstonh
    • #6
    • 13th May 19, 6:43 PM
    • #6
    • 13th May 19, 6:43 PM
    All I understand is that I have never been informed of the Ongoing Charge figure which you said I was directly paying. If I have been directly paying it surely it should have been on my statements?
    No. There has never been a requirement to tell you the fund charges of the funds you invest in apart from at point of sale. Or upon request.

    The statements may have shown percentages in the past (some did. some didnt) but the monetary amount is a new requirement.

    My statements use non of these acronyms they just list charges to my fund as 'Fees'
    There is no defined layout and the FCA offered no guidence. So, firms are doing things differently. However, most are laying out the charges as
    OCF, Transaction Charges, Incidental/Other charges. and then total.

    The problem you have is that your "product" is over 20 years old and held in an old fashioned way. Its probably more expensive because compared to modern options. Banks usually are.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Richardx46
    • By Richardx46 13th May 19, 8:35 PM
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    Richardx46
    • #7
    • 13th May 19, 8:35 PM
    • #7
    • 13th May 19, 8:35 PM
    Thanks I will just cash it in as soon as this brexit nonsense is sorted. I don't understand any of this to be honest. I guess financial products are not for me. Just stick the funds in a cash saver with the rest of my assets. They seem to have done about as well as this my only voluntary venture into buying a financial product.
    • short butt sweet
    • By short butt sweet 14th May 19, 5:12 AM
    • 333 Posts
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    short butt sweet
    • #8
    • 14th May 19, 5:12 AM
    • #8
    • 14th May 19, 5:12 AM
    cashing it in, because the fees are higher than you thought, is not a great idea. switching to lower-fee funds would make more sense. investments are likely to outperform cash savers in the long term, even after paying all the fees. OTOH, if you don't like holding investments which can go up and down in value, and prefer something that can only go up, then switching to cash savings would make more sense.

    it sounds like you are holding funds (in an ISA) in HSBC Global Investment Centre, which is charging 0.25% per year for their service, but that the cost of the funds you're holding (the OCF) is c. 0.8% a year on top of that.

    all funds have an OCF, but 0.8% is high, and you could get something much lower, somewhere near 0.2%, if you go for "passive" funds.

    with HSBC, the obvious ones to consider would be their Global Strategy range (which come with various different risk levels, depending mostly on how much they hold in equities), or (for even higher risk, because it's 100% in equities) HSBC FTSE All World Index.
    Last edited by short butt sweet; 14-05-2019 at 5:14 AM.
    • Richardx46
    • By Richardx46 14th May 19, 6:40 AM
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    Richardx46
    • #9
    • 14th May 19, 6:40 AM
    • #9
    • 14th May 19, 6:40 AM
    Thanks for that @short butt very helpful.

    No I don't want or have any need to take risks so I will sell the Fund soon, price looks like it is in a slight temporary? dip right now.

    Actually been doing some sums - Over the last twenty years I have kept by far the greater amount of my savings in cash ISAs usually 1-2 year fixed rates. Moved the money regularly to chase best deals and there appears to be very little difference in my returns doing that and my returns from this Fund. Certainly not enough to justify taking any risks at all. Thanks again
    • short butt sweet
    • By short butt sweet 14th May 19, 4:31 PM
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    short butt sweet
    well, if your fund has done similarly to savings accounts over 20 years, then i'm guessing it might be a fund that only invests in UK equities (you can name the fund, if you want to ). because a fund that was invested more in (a broad spread of) global equities would almost certainly have done a lot better in that period.

    now, for all we know, it may be that UK equities will do better than global equities generally over the next 20 years. so this may look like hindsight. but the point is that, if we don't know what will do best, it's more prudent to spread our bets by going for global equities (which do include UK equities, among all the other countries).

    also, a lower-charging fund would have done better.

    so perhaps you're just in the wrong fund ...

    you are correct that, if it goes up and down, but ends up doing about the same as savings accounts in the end, there isn't much point in investing. but i would expect to do better than that from investing in the long run.

    (the funds i mentioned in my previous post are all invested in global equities, not just UK equities.)
    • Richardx46
    • By Richardx46 15th May 19, 6:53 PM
    • 6 Posts
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    Richardx46
    Thank you @short butt will consider your good advice.
    • dunstonh
    • By dunstonh 15th May 19, 9:20 PM
    • 98,597 Posts
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    dunstonh
    Ironically, the charges on savings accounts are often higher than the fund charges. The difference is that fund charges are explicit. Savings accounts are implicit. One you see. The other you are not told of at account level. The net interest margin is around 1.9% on savings.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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