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:
- Funds will now carry an explicit 0.2% per year custody charge (capped at £50 per quarter) – this essentially replaces the trail commission that intermediaries used to get from funds. There will be a £4.95 dealing charge to buy or sell funds, reduced from £9.95 now. Since the ban on trail commission should be accompanied by a switch to ‘clean’ funds (funds with lower expense ratios to reflect the fact that they no longer pay trail commission), many investors will still pay less from this more transparent pricing and Youinvest looks like it will offer one of the cheaper services when the dust settles.
- Self-Invested Personal Pension (SIPP) accounts now carry an additional fee of £5 per quarter below £10,000, £15 per quarter between £10,000 and £20,000 and £25 per quarter above £20,000. This isn’t surprising – Sippdeal was extremely unusual in not charging any kind of admin fee for SIPPs. The resulting fee will still be the lowest SIPP admin fee that I’m aware of, barring Hargreaves Lansdown for smaller SIPPs (0.5% capped at £200 – but HL has yet to announce its platform review-compliant pricing, so that may change). That said, the tier structure is odd – stepping from £5 to £15 and £15 to £25 at specific points is not especially fair on investors around those points and a charging a percentage of assets (with a cap) rather than a flat fee would probably have been better.
- The foreign exchange charge for international dealing will now be 1%. This is an unpleasant surprise. Previously Sippdeal was one of the few brokers that simply passed on the market maker’s FX charge when dealing in US and European stocks, which amounted to around 0.5% for smaller deals and less for larger ones. So this change represents a very substantial and unwelcome hike and one that seems difficult to justify. The FX charges levied by most stockbrokers don’t represent a market cost for currency conversion; instead it’s hard to avoid the conclusion that they are used as a place where brokers can pad costs to make up for lower dealing fees or account fees on the basis that most investors don’t notice the FX rate or appreciate the impact. It’s disappointing to see that Youinvest appears to be going down this route.
The new fees take effect from the beginning of January. I’m still waiting for clarification on a couple of details and will update the broker directory entry and various comparison tables when I have them. For now, my initial conclusion is that Youinvest remains one of the cheaper options for small international stock ISAs, due to its lack of an account fee for these at present, but is no longer the cheapest. It will probably remain the cheapest for international stocks in a small SIPP. Judged solely on costs, it has probably become meaningfully less competitive for large ISAs and SIPPs and for accounts that don’t involve a tax wrapper.