Tag: uk

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Saxo Modern Wealth Management cuts fees

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.

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News

TD Direct to raise international commissions

TD Direct Investing (formerly and still almost universally referred to as TD Waterhouse) has announced new fees with effect from February 2013 [PDF]. I’ll update the details on this site closer to the time, but the key changes are summarised here [PDF] and appear to be mostly negative. In brief, they are:

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Fastrade to rebrand and change fees in 2013

Charles Stanley‘s Fastrade service – notable for being one of the cheapest ways to get CREST Personal Member Account – is going to be rebranded as Charles Stanley Direct in the new year. The firm is promising that this isn’t just cosmetic and the new service will be improved; less encouragingly, it will also be raising some fees later in the year.

While the new fees haven’t yet been posted on the site, they have been emailed to a contributor on a Motley Fool UK discussion, from where I’ve copy and pasted them below:

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Singapore stocks on the LSE

Barring any last-minute glitches, the London Stock Exchange will be launching trading in major Singapore-listed stocks on Monday 19th November, as part of a cross-listing agreement announced in July. Reciprocal trading in FTSE 100 stocks on the Singapore Exchange is intended to start in the first half of 2013.

There will be 37 Singapore stocks initially (Straits Times Index and MSCI Singapore Free constituents) and trading will be on the LSE’s new International Board. This is distinct from the International Order Book (where depository receipts trade) and the European Quoting Service and European Trade Reporting Service, the new MiFID services that have replaced the old International Retail Service.

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News

Unbundled pricing for UK fund supermarkets

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.

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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.

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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.
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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.

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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.

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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.