Feb 012014
 

The ban on UK execution-only brokers receiving trail commission takes effect in April 2014, so the few providers who have not yet announced their revised charges have been rushing to do so.

Fidelity FundsNetwork

Taking FundsNetwork first, Fidelity will be charging a relatively straightforward 0.35% on fund holdings up to £250,000 and 0.2% from £250,000 to £1,000,000 (stocks, investment trusts and ETFs are not affected – the Fidelity share dealing service is a white label service operated by Charles Stanley). There’s no minimum charge.

That’s towards the middle of the pack on costs – the lack of a minimum fee means it’s better than some for smaller portfolios, but will be beaten by – for example – Charles Stanley Direct (Charles Stanley’s own d2c fund and share platform, not to be confused with the aforementioned white label share dealing operated for Fidelity).

If you’d prefer to use the FundsNetwork platform anyway, Fidelity’s direct pricing can still be beaten by using Cavendish Online, which is an execution-only broker that uses Funds Network. The cost here is 0.25%, with FundsNetwork taking 0.2% and Cavendish getting 0.05%.  (This is Fidelity’s pricing for intermediaries of 0.25%, announced a couple of years ago, but with the fee split between Fidelity and Cavendish and a waiver of the £45 account fee.)

So at present, there is no reason that I’m aware of to go direct to Fidelity (and never has been – FundsNetwork has always been cheaper via Cavendish and other intermediaries.)

Changes take effect from 9th February 2014.
Continue reading »

Jan 192014
 

Hargreaves Lansdown has finally unveiled its new charging structure to comply with the impending ban on platform receiving trail commissions from funds. As with other firms, this represents a major shake-up of its business model for funds, but the impact on equity investors was limited. The major changes are:

  • The custody fee for equities, ETFs and investment trusts in an ISA or SIPP was cut to 0.45% per year, from 0.5%, in line with the new charge for funds. The caps of £45 for an ISA and £200 for a SIPP remain unchanged.
  • Investment trusts held in a regular dealing account will also be charged at 0.45% (max £45), as in an ISA. The new charge does not apply to shares and ETFs. This decision seems to be proving unpopular along clients and understandably so. It might reflect a fear that clients could begin switching out of open-end funds (especially non-trail paying ones where custody fees were relatively low under the old model, but will now be 0.45%) into investment trusts.
  • There is now a £10+VAT fee for some corporate actions (rights issues and other events “requiring us to seek and act on your instructions”).
  • Closing an account will now carry a £25+VAT fee.

The new charges will take effect from 1st March (with the exception of the account closure fee, which comes in from June). I have updated Hargreaves Lansdown’s entry in the broker directory and the UK online stockbroker table.

The impact on investors who hold funds will be much greater. Many should be better off, as the combination of the 0.45% custody charge and lower TERs on clean share classes of funds should mean lower total costs than on the old commission-paying share classes. However, some investors – for example those who hold Vanguard index funds, which didn’t pay trail and were previously subject to a fixed custody charge of a few pounds per year – will often be much worse off, as they will now attract the uncapped 0.45% fee.

I’ll overhaul the UK fund supermarket table when brokers have finished announced their revised pricing; at the moment, the industry is in flux and picking a platform is difficult because there is little clarity on which will still look cheap in a few months. In the meantime, Justin Modray’s Candid Money is doing an excellent job of tracking what each broker has announced so far on funds.

Nov 302013
 

Sippdeal – up to now one of the cheaper UK brokers for international dealing – has rebranded itself in an effort to shed its SIPP-only association, changing to the rather clunky-sounding AJ Bell Youinvest. More importantly, it’s announced a new charging scheme to bring its business model into line with the Financial Conduct Authority’s platform review and the resulting ban on execution-only brokers receiving trail commission.

Unfortunately, Youinvest has combined this with another rather unwelcome fee change that will be much more of an issue for international investors, even though few people seem to be picking up on it so far. Full details of all the changes are listed on the Youinvest website [PDF], but the key points are: Continue reading »

Apr 262013
 

The UK Financial Conduct Authority (FCA) – the new, allegedly improved successor to the FSA – has published the long-awaited “platform paper” setting out new rules on rebates of fund charges from fund managers to investment platforms.

This follows the Retail Distribution Review rules that came into effect at the beginning of the year, which banned financial advisers from receiving ongoing payments made by fund managers (a practice known as trail commission). The FCA will now bring in something similar for investment platforms, which are the intermediaries where the investor or adviser can access funds from many different fund firms in a single place.

These rules will radically alter the way that UK platforms and fund supermarkets charge for their services, since most currently rely on these rebates as some or all of their charges. In future, they will need to charge investors directly for their services.

For more background on how rebates and charges currently work, see this earlier article on RDR and unbundled pricing. Below is a quick summary of the FCA’s new rules and what they may mean for investors. Continue reading »

Jan 222013
 

Justin Modray of Candid Money has launched a rather useful new tool for UK fund investors: An interactive fund platform comparison that lets you check how much a given fund or basket of funds will cost you across multiple platforms and helps identify the best fund supermarket/discount broker combination for your needs.

So far there are six fund supermarket/broker combinations on there – Alliance Trust Savings, Bestinvest, Cavdenish Online, Clubfinance Frequent Trader, Interactive Investor and rPlan. Several others are on the way – ICICI and TD Direct Investing (which are both Cofunds brokers, like ICICI) and Sippdeal.

The notable omission is Hargreaves Lansdown, which has declined to take part. Given how uncompetitive its charges look these days, that’s no surprise.

It would perhaps be handy to have Saxo’s Modern Wealth Management service in there as well at some point, but other than that the tool covers all the providers currently included in the UK fund supermarket comparison table on this site.

Jan 172013
 

I’ve recently noticed that UK discount funds broker Commfreefunds as stopped taking on new clients – this is apparently because the firm is planning to launch a new service, presumably in line with the changes brought about by RDR and the platform review.

The firm was one of the cheaper options for investors with smaller portfolios to access the Cofunds supermarket, rebating all broker commission in exchange for a 0.19% annual fee. With it now out of the market for now, Interactive Investor will generally remain the cheapest Cofunds option for larger portfolios, while Clubfinance is probably the lowest-priced option for smaller ones (although ICICI’s new service may be competitive for those in between).

I’ve updated the fund supermarket comparison table to reflect this.

Jan 102013
 

The temporary but large reduction in funds available for investment on the Alliance Trust Savings platform – give quite high profile coverage in the Daily Telegraph – is another example of why picking a new fund supermarket requires caution while the effects of the Retail Distribution Review are still working their way through.

I am not inclined to castigate ATS too much over this – it is reacting to RDR and the platform review far more pre-emptively than most of its peers and it’s to be commended for moving to clean pricing as quickly as possible. Perhaps the change could have been better communicated, but ATS seems to have a fairly comprehensive RDR changes page to update users on progress.

The new terms on fund charges [PDF] generally look significantly better. Obviously, you need to allow for ATS’s charges on top of the clean fees, but seeing some firms already bringing their fees down on a transparent basis should hopefully drive competition across all platforms. Continue reading »

Dec 192012
 

Slight delay on updating this due to other commitments, but Saxo announced new fees for its UK Modern Wealth Management service, all of which seem to be in the client’s favour. The main changes are:

  • The waiver of commission on currency conversion for international trades has been made permanent. Any FX mark-up near 0% is rare, so this makes it extremely competitive, with the only downside being that the MWM platform only has a limited range of international markets (the new rates do not apply to Saxo Trader). In particular, it’s good for anyone who wants to hold overseas stocks in an ISA, since Saxo’s new rates make it one of the cheapest ISAs for foreign stocks around.
  • The annual fee of £35 has been removed for regular investment accounts and only applies to ISAs.
  • The fund supermarket has become more competitive – it’s now on an RDR compliant basis and will now return all trail and platform commission to investors. Saxo will charge an annual custody fee of 0.5% on fund holdings, although this is being waived until January 2014. It’s hard to know how competitive 0.5% will look in a year’s time, since most of the supermarkets have not yet announced their post-RDR pricing, but I’d guess it will be mid-tier – other firms such as Cavendish will probably be cheaper. Still, Saxo is for now a much more serious contender as a fund supermarket than it was, so I’ve added it to the fund supermarket table for the time being.

Overally, good to see a firm lowering costs and a contrast to TD Direct Investing’s changes the other day.

Nov 132012
 

The FSA’s Retail Distribution Review (RDR) is set to shake up investment costs in the UK enormously over the next year or so. With effect from January 2013, financial advisers will no longer be able to receive trail commission – ongoing payments from fund groups – on new investments.

More importantly for DIY investors, the FSA is then likely to ban fund platforms for receiving trail commission with effect from January 2014. This means that the fees currently charged by many execution-only firms will have to change drastically.

Once that happens, many of the details in this site’s UK fund supermarket comparison table will change significantly. Unfortunately, exactly what fund supermarket pricing will look like once RDR is complete isn’t clear, making it hard to choose a new provider at the moment.

However, many of the major fund platforms have now announced their “unbundled” charging schemes – unbundled meaning that they must transparently and explicitly charge the investor for their services, rather than getting paid a platform fee in the background out of trail commission. And this is beginning to give us some idea of what fees may look like in a year or so. Continue reading »

Oct 212012
 

Citywire is reporting proposals by Barclays to counteract the FSA’s forthcoming Retail Distribution Review ban on funds paying trail commission to intermediaries, by trying to charge the fund providers “administration fees” for having their products on its platform.

Whether the FSA will permit this isn’t clear, but the idea seems to go against the initial spirit of RDR. The FSA’s professed goal is for all the costs to be transparent to the client – they should be paying explicit charges for using the platform, as a flat fee or percentage of their holdings. Not imposing these and instead charging opaque admin fees to providers is not significantly different to the current system of trail commission.

It’s hard to argue that this comes out of the provider’s own margins – that simply means that rather than management fees falling to (say) 0.75% to reflect what the fund firm currently gets, they will just fall to (say) 1% to cover the extra payment that the firm must make to the platform. It will be an implicit share of the fees rather than an explicit one, but the same outcome. Continue reading »