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:

  • 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.

  3 Responses to “New charges and new identity for Sippdeal”

  1. Good article on AJ Bell sippdeal
    Client is even less likely to notice the foreign exchange commission of 1% they charge since their trading room does not mention it and it is not disclosed as a charge on the transaction note- its hidden- which is very unwelcome
    Alos they do not allow holding of foreign currency so the 1%’s will start racking up as when you sell a share you have to convert back to gbp and buy another foreign share you convert again – so they round trip is 2-3% of non recorded commission! That will kill any returns and is outrageous considering the cost charged elsewhere like with interactive brokers which is $2.50 per transaction.

    • Yes, it was a disappointing decision on their part. I think Sippdeal/Youinvest are fairly good in most respects, but the approach of ‘everybody else has higher FX charges, so we’ll increase ours a bit and we’ll still be competitive’ doesn’t impress me.

      For what it’s worth, the argument that a lot of firms use is that the high FX cost is basically paying for the higher custody costs and settlement risk that apply when dealing in foreign securities. I understand the point, but I would prefer to see explicit custody fees and clean FX commissions so I know exactly where my costs are going.

      • Their justification is just plain wrong!

        They are looking for a way to make up the trail commission (on unit trusts and mutual funds) taken away from them by the regulator. The regulators reason for taking trail commission away was that the trail was a cross subsidy to other clients and that this was not fair.

        Sippdeal’s reaction and means of making up this payment is to hide a huge fx charge on investors who buy and sell foreign shares. This is a massive subsidy to all other investors. In effect sippdeal have been allowed to replace one wrong with an even bigger wrong. Clearly sippdeal don’t get it.

        And yes others like Hargreaves Lansdowne also do this on the fx charge.

        What is the matter with these people? Do they enjoy having to write to customers years later and ask them if they want compensation for ‘legacy issues’ that they will further say “those that are responsible for this have now left the building”.

        There is a way round it- move to a provider who uses interactive brokers. This is for the more sophisticated investor who understands or is willing to study and use the correct tools for the job.

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