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  • FIRST POST
    • TUVOK
    • By TUVOK 4th Aug 18, 3:31 PM
    • 13Posts
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    TUVOK
    Investing directly with fund companies?
    • #1
    • 4th Aug 18, 3:31 PM
    Investing directly with fund companies? 4th Aug 18 at 3:31 PM
    Has any member experience of investing into a fund company such as Vanguard, Fundsmith, Baillie Gifford?
    The charges at Hargreaves Landsdown are very high, the company gives good service but the charges are very steep.
    For example, I estimate that investing £1000-00 for five years with HL would cost £215-90 out of interest made.
    Investing the same amount and time period with Vanguard would cost £92-50, a vast difference!
    Any replies would be appreciated.
Page 1
    • londoninvestor
    • By londoninvestor 4th Aug 18, 4:26 PM
    • 111 Posts
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    londoninvestor
    • #2
    • 4th Aug 18, 4:26 PM
    • #2
    • 4th Aug 18, 4:26 PM
    Don't disagree that HL is expensive, but do you perhaps have a decimal point in the wrong place?

    Your figures would mean that HL cost you 21.5% over 5 years, i.e. 4.3% per year. They're not the cheapest but they're not that expensive
    • AnotherJoe
    • By AnotherJoe 4th Aug 18, 4:39 PM
    • 10,116 Posts
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    AnotherJoe
    • #3
    • 4th Aug 18, 4:39 PM
    • #3
    • 4th Aug 18, 4:39 PM
    IIRC Vanguard are about 0.22% and HL 0.45%. So as said I think it should be £18 for HL and £8.80 for Vanguard. Not a vast difference, not even a tenner. (Edit for some reason I did 4 years not 5 but same principal)
    Last edited by AnotherJoe; 04-08-2018 at 8:48 PM.
    • bowlhead99
    • By bowlhead99 4th Aug 18, 4:48 PM
    • 8,157 Posts
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    bowlhead99
    • #4
    • 4th Aug 18, 4:48 PM
    • #4
    • 4th Aug 18, 4:48 PM
    The charges at Hargreaves Landsdown are very high, the company gives good service but the charges are very steep.
    For example, I estimate that investing £1000-00 for five years with HL would cost £215-90 out of interest made.
    Investing the same amount and time period with Vanguard would cost £92-50, a vast difference!
    Originally posted by TUVOK
    You have either misread the charges or misused your calculator, because your figures are about ten times higher than reality. The charge at HL is not 4.5% a year but 0.45%. So £4.50 the first year, if your £1000 is invested for the whole year. So a thousand pounds invested for five years (assuming no significant investment gains or losses) would cost you about £22 not £220.

    You are right that it is more expensive than going direct to the fund manager, in the case of SOME fund managers who offer you access to their products at a competitive price, such as Vanguard.

    There are several reasons why people don't just go direct:

    Going direct is not always cheaper..One reason for that is because building an investor servicing / customer admin function to deal with small retail investors who might only want to invest a few hundred or a few thousand pounds a time, is something that's expensive for a fund manager to do, and only gets cheaper with economies of scale. So a business with hundreds of thousands of indivdual customers offering a wide variety of investments from all different fund managers can do it cheaply, or perhaps not very cheaply to the customer but quite profitably for themselves.

    So HL choose to charge £4.50 per £1000 invested per year and Charles Stanley Direct choose to charge £2.50 per £1000 invested per year. Whereas if the fund manager created a direct-to-customer offering, splitting the costs of running the investor servicing function over just a few customers, they would struggle to do the admin for a few pounds a year on a thousand pounds invested. Some fund manager products 'via themselves' are much more than the 0.15% Vanguard charges to use its in-house platform which only retails its own product. It only works when you have a lot of customers and one way to attract a lot of customers is to have a broad range of good products for sale. So Vanguard can offer the service cheaply as it drives demand for their product and they already have trillions under management in the US and experience in running a direct-to-customer offering. Not all can.


    Ignoring costs, from an investor point of view it is quite restrictive to go direct to a fund manager because you can only hold certain products in the account. So if I open up an ISA with Fundsmith and put £1000 in it, I can't also invest in a bond fund or a small companies fund or a UK-focussed fund or a property fund, inside the ISA, as Fundsmith doesn't offer any of those products, and I am not allowed to open up more than one S&S ISA in a year. Fundsmith and Vanguard and Baillie GIfford don't currently offer pensions either.



    Even if I didn't care about tax wrappers, when it comes time to rebalance my portfolio to my preferred allocations from time to time it would be annoying to have to cash out money from one fund with one fund manager, get the money back to my own bank account, then send it over to the other fund manager, and invest the money again. One manager is unlikely to have the best-in-the-market offering for every asset class or product type. If you use a funds supermarket or wrap platform you don't really have that problem and can instruct to sell/redeem and rebuy into a different product the same day.
    Last edited by bowlhead99; 04-08-2018 at 4:52 PM.
    • Alexland
    • By Alexland 4th Aug 18, 6:04 PM
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    Alexland
    • #5
    • 4th Aug 18, 6:04 PM
    • #5
    • 4th Aug 18, 6:04 PM
    I have had accounts with Vanguard Investor and am still with BG and the customer service was good and generally better than I am getting with HL at the moment.

    HL seemed to make a complete hash of my wife's LISA transfer so last year's bonus was months late and their systems are preventing her making any contribution this tax year. HL are slow to respond and need chasing to get resolution.

    Alex
    Last edited by Alexland; 04-08-2018 at 6:32 PM.
    • ValiantSon
    • By ValiantSon 4th Aug 18, 9:19 PM
    • 2,466 Posts
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    ValiantSon
    • #6
    • 4th Aug 18, 9:19 PM
    • #6
    • 4th Aug 18, 9:19 PM
    IIRC Vanguard are about 0.22% and HL 0.45%. So as said I think it should be £18 for HL and £8.80 for Vanguard. Not a vast difference, not even a tenner. (Edit for some reason I did 4 years not 5 but same principal)
    Originally posted by AnotherJoe
    Vanguard's platform charge is 0.15%, not 0.22% (perhaps you are getting confused with the OCF for LifeStrategy funds, which is 0.22%). So, Vanguard is one-third of the cost of HL; I'd say that was significantly cheaper.

    OP, yes, experience with Vanguard. Very positive. I can see no reason to pay HL 's rip-off fees if you only want to buy Vanguard funds.
    • eskbanker
    • By eskbanker 5th Aug 18, 12:02 AM
    • 7,820 Posts
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    eskbanker
    • #7
    • 5th Aug 18, 12:02 AM
    • #7
    • 5th Aug 18, 12:02 AM
    For example, I estimate that investing £1000-00 for five years with HL would cost £215-90 out of interest made.
    Originally posted by TUVOK
    At the risk of being pedantic, I estimate that you won't make a penny of interest!

    When investing, you'd hope to achieve some capital growth over the long term and would expect some dividends along the way, but if it's interest you're after, stick to savings accounts....
    • bostonerimus
    • By bostonerimus 5th Aug 18, 12:28 AM
    • 2,121 Posts
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    bostonerimus
    • #8
    • 5th Aug 18, 12:28 AM
    • #8
    • 5th Aug 18, 12:28 AM
    I have experience with Vanguard in the US which is very different from Vanguard in the UK right now. But I imagine Vanguard UK is looking to become more "full service". In general I'm impressed with Vanguard's service and their low costs and like that you are limited to their products as too much choice can be paralyzing. I have a brokerage account with US Vanguard where I can buy any fund, stock or bond for sale in the US, but I've never used it as if I stick to Vanguard funds I pay no platform or transaction fees. I like the idea of dealing directly with the fund companies as they cut out a middleman and should give you lower costs, but be careful that they do.
    Misanthrope in search of similar for mutual loathing
    • Alexland
    • By Alexland 5th Aug 18, 7:40 AM
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    Alexland
    • #9
    • 5th Aug 18, 7:40 AM
    • #9
    • 5th Aug 18, 7:40 AM
    At the risk of being pedantic, I estimate that you won't make a penny of interest!
    Originally posted by eskbanker
    At the risk of being even more pedantic the OP is should make at least 0.1% interest from HL on the cash balance run to pay the fees.

    https://www.hl.co.uk/charges-and-interest-rates

    Alex
    • george4064
    • By george4064 5th Aug 18, 7:50 AM
    • 1,010 Posts
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    george4064
    I have had accounts with Vanguard Investor and am still with BG and the customer service was good and generally better than I am getting with HL at the moment.

    HL seemed to make a complete hash of my wife's LISA transfer so last year's bonus was months late and their systems are preventing her making any contribution this tax year. HL are slow to respond and need chasing to get resolution.

    Alex
    Originally posted by Alexland
    Iirc, I read that the LiSA bonus issue was really down to HMRC being incompetent...
    "If you arenít willing to own a stock for ten years, donít even think about owning it for ten minutesĒ Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
    Save £12k in 2017 - #003 £12,427.51/£12,000 (104%)
    Save £12k in 2018 - #004 £4,457.62/£12,000 (37%)
    • Alexland
    • By Alexland 5th Aug 18, 9:15 AM
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    Alexland
    Iirc, I read that the LiSA bonus issue was really down to HMRC being incompetent...
    Originally posted by george4064
    Possibly the cause was never explained and HL could have been a bit more proactive rather than promising it would be paid by dates when then passed without further comment. As part of my wife's transfer they recorded her 2017 contributions as occurring in this tax year so she is now unable to make any 'further' contributions. We have been waiting nearly 2 weeks for them to fix with no ETA so I just chased them again. They made the same mistake on my transfer but fixed it quicker.

    Alex
    Last edited by Alexland; 05-08-2018 at 9:19 AM.
    • lindabea
    • By lindabea 5th Aug 18, 12:35 PM
    • 1,000 Posts
    • 143 Thanks
    lindabea
    At the risk of being even more pedantic the OP is should make at least 0.1% interest from HL on the cash balance run to pay the fees.

    https://www.hl.co.uk/charges-and-interest-rates

    Alex
    Originally posted by Alexland
    And for the same reason, the OP should make 0.25% interest on cash held with Vanguard
    Before doing something... do nothing
    • pafpcg
    • By pafpcg 5th Aug 18, 12:43 PM
    • 251 Posts
    • 233 Thanks
    pafpcg
    Going direct is not always cheaper..
    Originally posted by bowlhead99
    Bowlhead has already described why there are good reasons why not to go direct. Let me give you a real-life case:

    Twenty-five years ago, my partner & I started out our investments in equities. In addition to a few unit trusts, we purchased nine holdings in investment trusts, all of them direct from the trust manager. Some of them sent share certificates and the rest as nominee holdings in the trust's share plans. All these plans were then free and the costs were born by the investment trust as a promotional exercise.

    Over the years, these IT-sponsored plans have either completely closed or introduced charges or restrictions. For example, about ten years ago, Securities Trust of Scotland (STS) closed their plan and switched their holdings to Alliance Trust Savings; soon after that, ATS ramped up the cost with their move to flat-rate charging (prohibitive for our small £8k holding) so we paid for the holding to be certificated. In 2013, Foreign&Colonial introduced charging (I understand they were switching the running of their share plan to Halifax Share Dealing), even worse, Halifax systems won't allow accounts in joint names to trade so everything has to be done by post - we certificated the holding. In late 2013, the Witan share plan also introduced charging and we certificated again. And last year, Scottish Investment Trust decided to close their share plan (also run by Halifax Share Dealing) - we took the offer of commission-free dealing and sold the holding (and repurchased in one of our ISAs).

    The only investment trust share plan we've had dealings with and is still running is the Baillie Gifford plan (for our holding in Scottish Mortgage Trust), but in the knowledge that we would be wanting to run-down our holding over the next few years and that online trading within share plans is cumbersome and borderline impractical, we certificated our holding (for free!) and transferred them to a share broker's nominee account.

    With hindsight (whilst recogizing that online execution-only brokers weren't around in 1993), we would have simplified our buy-and-hold investment strategy if we had placed our investments through a specialist - we now have holdings in twenty-five different investment trusts at IWeb and SVS (with our SIPPs at AJBell). Of course, the differing trading processes for funds would alter the priorities.
    • Alexland
    • By Alexland 5th Aug 18, 1:39 PM
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    Alexland
    And for the same reason, the OP should make 0.25% interest on cash held with Vanguard
    Originally posted by lindabea
    But with Vanguard there is no need to run a cash balance as they are happy to collect fees via direct debit.

    Alex.
    • Alexland
    • By Alexland 5th Aug 18, 1:45 PM
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    Alexland
    The only investment trust share plan we've had dealings with and is still running is the Baillie Gifford plan (for our holding in Scottish Mortgage Trust)
    Originally posted by pafpcg
    Very interesting; I didn't know that so many old investment trust schemes had moved to Halifax SD. The BG online client access website is very old fashioned (even compared to Halifax SD which is hardly slick) and the cost is so low that I cannot see them investing in it further so eventually with tech refresh and increasing security requirements then it seems unlikely they will continue to run it either which would be a shame as I quite like it.

    Alex
    • TUVOK
    • By TUVOK 6th Aug 18, 8:01 AM
    • 13 Posts
    • 1 Thanks
    TUVOK
    Firstly, many thanks for the replies and secondly my apologies as I entered an incorrect figure in my opening message.
    To clarify, I was basing my query on a £5K investment over a 5 year period in a Vanguard Life Strategy 20% equity (Acc) held in a Stocks and shares ISA
    HL own figures for this fund are : HL charges £121-75 and investment charges of £94-15 making a total for the 5 year period of £ 215-90
    From the Vanguard site, there is a fund charge of 0.22% and I believe an account fee of 0.15%, making the total fee charge of 0.37%, which equates to £18-50 for 1 year and £92-50 for 5 years.
    I hope that these figures are correct? If yes, I calculate the difference as £123-40 for a £5000-00 investment over a 5 year period, which works out as a saving of £24-68 over a single year.
    Am I correct or have I missed some thing that more experienced members can point out.
    My thanks for your help.
    • bowlhead99
    • By bowlhead99 6th Aug 18, 8:53 AM
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    bowlhead99
    Whether you buy the fund from Vanguard direct or from HL, the fund still has running costs of that 0.22% you mention (plus internal transaction costs each time the fund is buying and selling the underlying investments, which are harder to quantify).

    So the difference is how much you pay for the platform service (custody of your investment in the fund and administration of your account) which is charged at 0.15% a year at Vanguardinvestor direct, or 0.45% on HL's service. The difference between 0.15% a year and 0.45% a year is 0.30% a year. If you have £5000 invested, multiply the 0.30% fee difference by the £5000 and you can see that the difference will be £15 a year. For a five year period that will be £15 X 5 = £75.

    The £15 a year assumes the fund is worth £5000. If the fund increases in value over time, the platform admin charge difference goes up, because it's a fixed percentage of the asset value. If it does down, your charges go down. The HL calculator assumes that the investment grows at 4% a year, so that although their charge is a constant percentage, it's charged on a higher balance every quarter. In other words if you look at it as 0.45% a year, that's 0 45% X £5000 at the beginning of the investment , £22.50 a year, but the total projection is more than £22.50x 5 = £112.50, because the investment value is presumed to be going up. So they say £121.75 for their charge. To compare apples to apples you would have to assume the same performance at Vanguard direct.

    Also HL's figures attempt to capture more of the 'true' cost of the vanguard fund than the headline numbers on Vanguard's own site, to try to improve comparability with other investments they sell. As you mentioned, the ongoing charges figure for the fund is 0.22% (£11 a year on £5000 invested) but HL quote the "investment charges" as £17 in the first year rising to £20 in the fifth year as the fund value grows. The excess amount over and above the Ongoing Charges Figure of 0.22% is an attempt to capture the internal "transaction costs" within the Vanguard fund (in other words, what I mentioned in my opening paragraph as "plus internal transaction costs each time the fund is buying and selling the underlying investments, which are harder to quantify")

    But those costs will be the same no matter where you buy the fund because they are internal to the fund and are not levied by the investment platform. So if you are choosing between platforms they don't come into it.

    As an aside: funds are supposed to make their "internal transaction costs" figures known, to help aid comparability between funds. However, the way managers calculate these somewhat theoretical figures does not give amazingly meaningful numbers. So, many people will still focus on the 'OCF' or ongoing charges figure which was well understood in the industry before the transaction costs stuff came in. Both HL and Vanguard show the OCF as 0.22% on their summary/ at a glance page and make you dig further to find the extra cost information. But the internal transaction costs borne by the fund itself when buying or selling it's investments won't make a difference to your decision to go direct or via a fund supermarket - because whatever the number is, it's the same number no matter where you buy the fund.
    Last edited by bowlhead99; 06-08-2018 at 9:26 AM.
    • TUVOK
    • By TUVOK 6th Aug 18, 10:49 AM
    • 13 Posts
    • 1 Thanks
    TUVOK
    Thank you for your excellent analysis of my query.
    I can now see clearly, as you state the saving of approx. £15-00 per year,
    My original query arose because of an examination I have carried out on what HL is charging me per year!
    HL provides an excellent service, but at a high cost,.
    Obviously I do not want any errors etc to happen with my investments such as I have read about with other platforms, but I am actively investigating all avenues to reduce my HL costs.
    I have eliminated paper reporting etc from my HL account and I have invested in some index trackers for various areas, which are producing good returns, perhaps highlighted by lower costs.
    I invest in funds and equities only, both in an ISA account and a ordinary Vantage account, no IT's.
    I would be interested to read of what other forum members have done to lower their HL costs?
    • eskbanker
    • By eskbanker 6th Aug 18, 11:09 AM
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    eskbanker
    I would be interested to read of what other forum members have done to lower their HL costs?
    Originally posted by TUVOK
    Shopped around to identify cheaper providers!

    http://monevator.com/find-the-best-online-broker/
    http://www.comparefundplatforms.com/
    http://forums.moneysavingexpert.com/showthread.php?t=5583030

    Not sure what's behind your perception that other platforms make errors and that (implicitly) HL don't, but would humbly suggest that's not an accurate reflection of the market....
    • TUVOK
    • By TUVOK 6th Aug 18, 11:15 AM
    • 13 Posts
    • 1 Thanks
    TUVOK
    My perception of other platforms is not perhaps errors as such but quickness of service, scope of platform etc etc, mainly derived from comments on Citywire forum and This is Money.
    I have found HL to give excellent quick service, I have never had the slightest problem with them, but would like to reduce the fee charged. I have tried negotiating for a reduced fee but with out success.
    Thank you for the links.
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