Author: Cris

Categories
News

Barclays and the spirit of RDR

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 “Barclays and the spirit of RDR”
Categories
Investment

Best ISAs for foreign stocks – October 2012 update

Update October 2013: There is now a new version of this comparison incorporating changes to brokers’ fees over the past year. See Best ISAs for International Stocks October 2013.

Update March 2013: Saxo Bank is closing the Modern Wealth Management service and introducing an ISA wrapper on its Saxo Trader platform. This seems likely to work out slightly more expensive than the Modern Wealth Management example below, but will apparently allow access to a much wider range of exchanges. The comparison table will be updated once I have full details of the revised service.

[Updated again on 06/11/2012 to include estimated costs for Interactive Investor and again on 19/12/2012 to reflect Saxo Bank’s new pricing for Modern Wealth Management]

I’ve updated the tables from the Best ISAs for international stocks post from April to reflect a few fee changes and include a new broker. Some changes and key points are:

  • iWeb has cut its dealing fee to £5 per trade. On the downside, its foreign exchange margin is scheduled to increase to 1.5% in April 2013, which will make it significantly more expensive. The figures in the table are based on the current margin, but estimates based on the increased margin are included in the footnotes.
  • Sippdeal has recently been added to the broker database and added to the tables for the first time. I wasn’t aware of this firm’s international offering until recently – all told, the cost structure looks very competitive if you want to trade in CREST-settled foreign stocks.
  • The figures for iDealing have been changed to be based on a 0.5% foreign exchange margin. Like Sippdeal, iDealing passes on the market maker’s FX commission without adding its own – the firm has previously told me that 0.25% was a typical mark-up, but based on figures from Sippdeal and elsewhere, I think this is probably too low for the relatively small deals I’m factoring into the table, so have adjusted it for this example.
  • Admin fees/inactivity fees for Alliance Trust, Halifax and Selftrade have changed slightly since the last update, although this has had relatively little impact on their overall competitiveness.
  • The estimate for Saxo Modern Wealth Management is based on its scheduled 0.5% regular FX charge rather than the introductory offer of no FX mark-up.  Saxo has now made the 0% FX charge its permanent rate, so the figures have been updated – this makes it look extremely competitive, albeit for a limited range of markets.
    Continue reading “Best ISAs for foreign stocks – October 2012 update”
Categories
Updates

Updates on Saxo Modern Wealth Management

Since the Saxo Modern Wealth Management platform for UK long-term investors is rather different to the Saxo Bank platform, it now has its own entry in the broker directory. There are also a few updates to the details of the service from the summary when it first launched in April 2012.

Categories
News

Fidelity to add eight new markets

In what looked like a carefully timed attempt to make Charles Schwab’s new international service less newsworthy,  Fidelity has announced that it will be adding eight new countries to its international platform by the end of 2012. The proposed new countries are Austria, Denmark, Finland, Greece, Ireland, Poland, South Africa and Spain.

There are no details on fees yet, but assuming they are sensible, Fidelity’s international service may start to look a relatively decent option for US residents to invest in a wide range of international markets at reasonable cost. Countries such as Poland and South Africa are still hard to trade in a cost-effective way, especially since US investors don’t have easy access to international firms such as Saxo Bank.

Categories
News

Charles Schwab launches new international trading account

Charles Schwab has extended its international investing services, following Fidelity’s decision to do the same earlier this year. The new Schwab Global Account offers online access to 12 non-US markets: Australia, Belgium, Canada, Finland, France, Germany, Hong Kong, Italy, Japan, Netherlands, Norway and the UK.

Schwab is initially is offering zero commission online trades until the end of 2013 – thereafter, international commissions will be in the range of US$15-35 online and US$50-75 by telephone (at current exchange rates). Currency conversion fees will be up to 1% and there is also a 0.1-0.25% fee from the local brokers that Schwab uses to execute trades abroad (something that isn’t clearly displayed on the Schwab website, but can be found in the latest fees guide [PDF]).

The Global Account seems to be distinct from the existing international trading service available through the Schwab One Account, which offered 20-30 countries for telephone trading, albeit at very high costs. While the Global Account mentions access to 30 countries in addition to the 12 online markets, this appears to mean the ability to trade ADRs and OTC stocks from other countries in US dollars, which is not at all the same thing as having direct access to a foreign market (selection will be more limited, liquidity will usually be poorer, spreads may be wider and prices may be stale).

Continue reading “Charles Schwab launches new international trading account”
Categories
News

Asean Exchanges link goes live

The Asean Exchanges Trading Link is one of those projects that could prove a substantial success or a damp squib – it’s impossible to tell which at this stage. But at least it’s finally under way. Last week, the trading link between Malaysia and Singapore went live and Thailand should join in mid-October, linking together around 60-70% of Southeast Asia stocks through a cross-border trading system.

The idea behind an Asean link-up is very obvious and pretty sensible. Southeast Asia has some attractive opportunities, but suffers from most local stockmarkets being relatively small. Making it easier for individual investors to trade stocks in neighbouring countries could boost liquidity, cut costs and ultimately create a semi-unified Asean capital market with a higher international profile to compete with larger emerging markets such as China and India.

Continue reading “Asean Exchanges link goes live”
Categories
Investment

Historical valuation data for global stockmarket indices

Long-term historical data on price/earning ratios, price/book ratios and dividend yields for stockmarket indices is extremely valuable in looking at long-term returns – but it can be very difficult to obtain. While price data is available for many major markets stretching back decades or more, valuation data typically hasn’t been recorded so carefully.

The figures that are available have usually been reconstructed from old earnings reports and are proprietary data sets that are expensive to access. For those who are willing to pay, Global Financial Data is probably the most comprehensive source for very long-term financial data of all kinds.

For those who can’t justify the cost of paid-for data, there are a few freely downloadable data series for some of the major indices around the world, although they are often hard to find and there is no consistency about which markets are available. The following links will take you to the ones I’ve found that are still updated  – if you’re aware of any others, please let me know in the comments below or by email.

Continue reading “Historical valuation data for global stockmarket indices”
Categories
News

Total return calculations for Hong Kong stocks

Webb-site.com is a very helpful tool for researching Hong Kong-listed stocks. Run by David Webb, a former Hong Kong stock exchange independent director, the site pulls together news and information about the officers and related parties of listed companies to make it easier to find links between them and hopefully spot corporate governance red flags.

Webb also publishes regular articles on governance and regulatory issues in Hong Kong and if you’re interested in Asian markets, it’s well worth signing up for his free newsletter to get these.

The site has just added something new: A tool for calculating and comparing total returns on individual stocks with data from since 1994, which seems to be the first such free source for the Hong Kong market.

Continue reading “Total return calculations for Hong Kong stocks”
Categories
Updates

New UK discount broker and Prague trading from Saxo Bank

There have been a couple of updates to broker details on the site. In the UK discount stock brokers table, I have added a new service from Clubfinance, previously known as a fund supermarket and the cheapest way for self-directed investors to access the Skandia platform.

This is quite an unconventional service in terms of fees. It charges an account fee of 0.35% per year, with a minimum of £25 per quarter, but online trades in UK shares are priced at just £0.5/trade. Quite a few UK brokers are likely to adjust their fee structure in the run-up to RDR and the platform review, so we can expect to see some others experimenting with unusual arrangements like this.

In the international dealing area, Saxo Bank has added the Prague Stock Exchange for cash equity trading. It’s always encouraging to see a major broker adding another awkward-to-access market, but in practice the significance of this one is limited – there are just  15 stocks listed on the Prague exchange and many of them are cross-listed in Vienna.

The Czech Republic also has an over-the-counter market, RM-SYSTEM Czech Stock Exchange, but that isn’t part of Saxo’s new service. Foreign investors interested in that could look to Fio Banka, which owns RM-SYSTEM and offers an online trading service.

Categories
News

Tax hit for UK investors in offshore funds

Interesting article on Citywire today covering the tax position of offshore funds for UK investors:

Wealth managers who unwittingly put their clients into the wrong type of offshore fund, structured product or ETF risk saddling them with a tax hit of up to 50% on their investments, accountants have warned.

Small boutique funds and new products coming to market that are based offshore may not have reporting funds status (RFS), or could still be in the process of seeking it. Many investors also view ETFs as shares rather than funds, exacerbating a lack of understanding on the issue.

Investors who redeem holdings in funds that do not have RFS could face punitive income tax rates of up to 50%, rather than capital gains tax of either 18% or 28%.

This is a topic I’ve covered on the site before: Avoid the tax trap on foreign funds. Unfortunately, it is no surprise to come across individual investors falling foul of this, since the rule is completely counter-intuitive at first – why would you expect that capital gains would be taxed as income?

However, it is a little more surprising if any significant amount of wealth manager clients are having this problem – as the accountants in the article are suggesting – since the issue is not exactly obscure and one would expect it to be well-recognised among any advisers who are putting clients into offshore funds.