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Charges

Index tracking funds and ETFs
TedSwippet
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Re: Charges

#221793

Postby TedSwippet » May 15th, 2019, 12:58 pm

mao44 wrote:I guess it is a toss up between iweb and Vanguard but leaning towards iweb with their zero platform fee.

If you plump for iWeb, probably best to move your holdings intact, rather than as cash. You could switch to the Vanguard equivalent inside iWeb after the move (or perhaps in HSBC before the move, if HSBC's platform permits). Or not at all, because frankly I don't see much in it between the two funds, and I hold both personally. iWeb lets you hold HSBC, Vanguard, Legal and General, Blackrock, Fidelity, and so on -- all of these are reputable tracker fund providers. A transfer of holdings could be slow, on the order of months, but involves no out-of-market stress. And you can pay in to the new ISA account while the transfer of older holdings is taking place; the receiving company will merge the transfer with any new holdings you bought there once it completes.

If you plump for Vanguard's platform, you will only be able to hold Vanguard funds or ETFs there, at least currently. That would mean you would have to sell your current HSBC holding and transfer the ISA in cash. This will be faster than moving holdings intact, but with some out-of-market time. (Which of course could go either way, but for me has always seemed to go against me -- somehow I always manage to miss a stock market rally rather than a plunge!)

In all cases, remember to transfer the ISA itself. Don't cash everything in, withdraw the funds to your bank, and then try to move that yourself. It won't work that way. Contact the receiving company, iWeb or Vanguard, to have them open a new account for you and then manage the transfer in for you too.

Finally, if this is your only investment, maybe consider branching out beyond UK all-share to something more global. The UK is well under 10% of world market cap, so if you only hold UK stocks you are not well diversified geographically. There are several all-world funds you could use instead, or you could complement your existing UK all-share with an ex-UK tracker fund.

mao44
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Re: Charges

#221844

Postby mao44 » May 15th, 2019, 4:59 pm

mc2fool wrote:
mao44 wrote:The fact sheet that you mention does show the charges at 0.41% but there are obviously additional charges on top.

The fact sheet Ted linked to shows OCF of 0.07% and transaction costs of 0.09%, for a total fund (product) cost of 0.16%, and an account fee of 0.25%, so, no, there shouldn't be any additional charges, that's it. The account fee can be lessened, worsened or avoided by using a different broker.

I note you say "I hold income units" and have also said you "reinvest the divis twice half yearly", so I wonder why you don't just hold the accumulation units instead to avoid the faff of reinvesting the dividends, and potentially avoid the cost of doing so if you move to a flat fee broker.


I rang HSBC again and queried why the statement they sent me was showing total costs at 0.52% when the fact sheet shows 0.41%. The woman I spoke to could not understand it either and is investigating and will get back to me.

Yes fair point regarding the income units. I guess with the accumulation the half yearly divis there will be no transaction costs as the units are automatically reinvested? I was charged £12.69 to reinvest my January divi.

mao44
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Re: Charges

#221856

Postby mao44 » May 15th, 2019, 5:38 pm

TedSwippet wrote:
mao44 wrote:I guess it is a toss up between iweb and Vanguard but leaning towards iweb with their zero platform fee.

If you plump for iWeb, probably best to move your holdings intact, rather than as cash. You could switch to the Vanguard equivalent inside iWeb after the move (or perhaps in HSBC before the move, if HSBC's platform permits). Or not at all, because frankly I don't see much in it between the two funds, and I hold both personally. iWeb lets you hold HSBC, Vanguard, Legal and General, Blackrock, Fidelity, and so on -- all of these are reputable tracker fund providers. A transfer of holdings could be slow, on the order of months, but involves no out-of-market stress. And you can pay in to the new ISA account while the transfer of older holdings is taking place; the receiving company will merge the transfer with any new holdings you bought there once it completes.

If you plump for Vanguard's platform, you will only be able to hold Vanguard funds or ETFs there, at least currently. That would mean you would have to sell your current HSBC holding and transfer the ISA in cash. This will be faster than moving holdings intact, but with some out-of-market time. (Which of course could go either way, but for me has always seemed to go against me -- somehow I always manage to miss a stock market rally rather than a plunge!)

In all cases, remember to transfer the ISA itself. Don't cash everything in, withdraw the funds to your bank, and then try to move that yourself. It won't work that way. Contact the receiving company, iWeb or Vanguard, to have them open a new account for you and then manage the transfer in for you too.

Finally, if this is your only investment, maybe consider branching out beyond UK all-share to something more global. The UK is well under 10% of world market cap, so if you only hold UK stocks you are not well diversified geographically. There are several all-world funds you could use instead, or you could complement your existing UK all-share with an ex-UK tracker fund.


Vanguard have indicated that I can transfer direct providing I remain in the FTSE all share therefore leaving the holdings intact.

I am well versed in the transfer of ISA's (cash version) so aware of the rules thanks. (:

I already own a 25 share HYP type portfolio which is pretty well diversified. I had just become a bit rusty regarding charges on my all share index tracker which I pretty much leave alone which was the whole point in the first place. I am pretty much a lurker on these boards and find the contributions to be very helpful. I will let you know what I finally decide to do and may even have a few more questions!

mc2fool
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Re: Charges

#222069

Postby mc2fool » May 16th, 2019, 11:53 am

mao44 wrote:Yes fair point regarding the income units. I guess with the accumulation the half yearly divis there will be no transaction costs as the units are automatically reinvested? I was charged £12.69 to reinvest my January divi.

HSBC charge you both a % account fee and dealing fees?!? Definitely time to move!

Yes, with accumulation units the dividends are, for all intents and purposes, effectively automatically reinvested. The mechanism is different from doing so with the income units in that when you reinvest dividends from those the money comes out of the holding and then back in when you reinvest it, so you do so by buying more units, whereas with accumulation units the dividends never leave the fund so what happens is that you have the same number of units but they get a higher £ value.

The end result (units x value of both) is theoretically the same, although of course with the accumulation units you don't have the delay and faff of getting the dividend and reinvesting it and, of course, there's no transaction costs, so it is better to get the ACC units than the INC ones if you don't actually want the income and want to reinvest.

As a side note, if you were to hold accumulation units outside of a tax shelter (ISA or SIPP) then you'd still need to count the notional dividends as an actually paid out for income tax purposes, and the "reinvestment" would count as a purchase and so require you to adjust the base cost of the units for capital gains tax purposes. That makes accumulation units and income units have effectively the same tax treatment, but as your holdings are within an ISA you don't need to faff with that. :D

mao44
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Re: Charges

#222167

Postby mao44 » May 16th, 2019, 4:23 pm

mc2fool wrote:
mao44 wrote:Yes fair point regarding the income units. I guess with the accumulation the half yearly divis there will be no transaction costs as the units are automatically reinvested? I was charged £12.69 to reinvest my January divi.

HSBC charge you both a % account fee and dealing fees?!? Definitely time to move!

Yes, with accumulation units the dividends are, for all intents and purposes, effectively automatically reinvested. The mechanism is different from doing so with the income units in that when you reinvest dividends from those the money comes out of the holding and then back in when you reinvest it, so you do so by buying more units, whereas with accumulation units the dividends never leave the fund so what happens is that you have the same number of units but they get a higher £ value.

The end result (units x value of both) is theoretically the same, although of course with the accumulation units you don't have the delay and faff of getting the dividend and reinvesting it and, of course, there's no transaction costs, so it is better to get the ACC units than the INC ones if you don't actually want the income and want to reinvest.

As a side note, if you were to hold accumulation units outside of a tax shelter (ISA or SIPP) then you'd still need to count the notional dividends as an actually paid out for income tax purposes, and the "reinvestment" would count as a purchase and so require you to adjust the base cost of the units for capital gains tax purposes. That makes accumulation units and income units have effectively the same tax treatment, but as your holdings are within an ISA you don't need to faff with that. :D


Yes at the moment HSBC are charging me 0.52% but the fact sheet states 0.41% so there is a discrepancy somewhere. I am waiting for a call back. Two friends of mine also have the same tracker with HSBC and are being charged the same so it's not just me!

mao44
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Re: Charges

#222177

Postby mao44 » May 16th, 2019, 4:58 pm

mao44 wrote:
TedSwippet wrote:
mao44 wrote:I guess it is a toss up between iweb and Vanguard but leaning towards iweb with their zero platform fee.


I was mistaken. Vanguard have confirmed what you thought, that I would need to to sell my current HSBC holding and transfer the ISA in cash. Darn! I am leaning even more towards iWeb if, as you say, I am be able to move my holdings intact, rather than as cash?

OhNoNotimAgain
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Re: Charges

#222621

Postby OhNoNotimAgain » May 18th, 2019, 8:36 am

It is possible to invest in passive funds directly and therefore avoid the platform fee.
And not all passives charge a dilutuion fee of 0.5% to cover stamp duty but this cost is absorbed by the fund and is expressed in the OCF so some analysis is needed when comparing OCFs.

TedSwippet
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Re: Charges

#222656

Postby TedSwippet » May 18th, 2019, 10:56 am

OhNoNotimAgain wrote:It is possible to invest in passive funds directly and therefore avoid the platform fee.

Can you give an example? Investing with HSBC directly triggers their 0.25% platform fee, and investing with Vanguard directly triggers their 0.15% platform fee. This despite the fact that in some cases these 'platforms' may well offer only the fund manager's own funds.

OhNoNotimAgain wrote:And not all passives charge a dilutuion fee of 0.5% to cover stamp duty but this cost is absorbed by the fund and is expressed in the OCF so some analysis is needed when comparing OCFs.

Few if any passives seem to charge a dilution fee these days. It's true that when Vanguard was first starting out in the UK in 2011 they applied a 0.1% levy on LifeStrategy funds, but they removed this in 2015. They removed this type of fee entirely in 2017. I can't think offhand of any passive funds that currently that charge a dilution levy.

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Re: Charges

#222692

Postby scrumpyjack » May 18th, 2019, 12:08 pm

Investing in ETFs (eg Vanguards) will not incur a platform fee on most brokers systems. Hargreaves Lansdown does not charge platform fees on Vanguard ETFs.

mc2fool
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Re: Charges

#222709

Postby mc2fool » May 18th, 2019, 12:41 pm

scrumpyjack wrote:Investing in ETFs (eg Vanguards) will not incur a platform fee on most brokers systems. Hargreaves Lansdown does not charge platform fees on Vanguard ETFs.

Actually they do in an ISA or SIPP. It's 0.45%pa on ETFs, ITs, shares, and bonds but capped at £45 for the ISA and £200 for the SIPP.

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Re: Charges

#222819

Postby scrumpyjack » May 18th, 2019, 6:27 pm

The HL charge in ISAs etc is only capped at £45 in respect of ETFs, ITs and Shares. The £45 cap does not apply to funds. I hadn't really considered the £45 annual charge to be a 'platform charge', which applies to funds (Vanguard ETFs are not Funds for this purpose at HL), though I suppose it is just a question of semantics!

I have always avoided Unit Trusts, now it seems generally called funds, due to the generally much higher charges

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Re: Charges

#222961

Postby mc2fool » May 19th, 2019, 12:36 pm

scrumpyjack wrote:The HL charge in ISAs etc is only capped at £45 in respect of ETFs, ITs and Shares. The £45 cap does not apply to funds.

No, it's a £4000 cap for funds. :D

scrumpyjack wrote:I hadn't really considered the £45 annual charge to be a 'platform charge', which applies to funds (Vanguard ETFs are not Funds for this purpose at HL), though I suppose it is just a question of semantics!

It's not a £45 charge, it's a 0.45% charge that happens to be capped at £45/£200 for ETFs, ITs, Shares, VCTs, gilts and bonds (ISA/SIPP).

So, if you had, say, £8K with them in funds you'd call the £36pa fee a platform charge but if you had £8K with them in ETFs you'd call the £36pa fee what? :D

Indeed, what about Vanguard, who have a platform fee of 0.15% for their ISA for funds and ETFs (capped at £375pa)?

scrumpyjack wrote:I have always avoided Unit Trusts, now it seems generally called funds, due to the generally much higher charges

UTs & OEICs are generally referred to as funds (while Exchange Traded Funds aren't!), but the "generally much higher charges" isn't such a good generalization nowadays,since RDR and the recent price wars. E.g. Vanguard's FTSE 100 Index Unit Trust has an OCF of 0.06% while for their FTSE 100 ETF (VUKE) it's 0.09%.


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