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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.

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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.

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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!

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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

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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!

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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?

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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.

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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.

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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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Re: Charges

#236037

Postby mao44 » July 11th, 2019, 10:06 pm

TedSwippet wrote:
mao44 wrote:I have just checked and I was moved to the C class of HSBC's UK all share tracker fund In September 2017 as the option to remain in retail class was removed. After RDR in 2012 I was offered the choice of remaining in the legacy class (retail) or moving to Clean share (C) and opted to remain in Legacy as the overall TER was less at 0.27% and subsequently reduced to 0.17%. I am guessing after the move to C class in 2017 the charges increased to a TER of 0.52% although I cannot find anything in the literature showing this. I will ring them to find out.

This all sounds very confused to me. As you can see from the links I posted earlier, the TER on the class C HSBC FTSE all-share tracker fund is clearly 0.07%, give or take. Hopefully HSBC can explain your charges, then. The TER (and for that matter, the OCF) are not the full story. Maybe HSBC are showing you their costs inclusive of some of the things that the TER and the OCF omit, for example this:

http://doc.morningstar.com/LatestDoc.as ... menttype=1

Even that doesn't reach 0.52% though. My suspicion is that you still hold the retail class, somehow. Can you post the ISINs of the fund(s) that you hold. You should be able to find these somewhere on your statements or online account, perhaps in the 'KID' or 'KIID' documents for the fund(s). They will be something like "UK" or perhaps "IE" followed directly by ten alphanumeric characters, for example "GB00B80QFX11" (this is the ISIN for HSBC FTSE All Share Index C Acc, Accumulation units). This should nail down exactly what you currently own.

mao44 wrote:As a result of this I have decided to transfer over to Vanguard who have sent me some literature. The TER for their FTSE all share tracker 0.28% which is nearly half of the charges I am currently paying. Again thanks for your detailed response.

Again, I'm mystified on where you get the 0.28% from. Vanguard's site shows that their FTSE all-share tracker fund has a 0.08% TER:

https://www.vanguardinvestor.co.uk/inve ... ome-shares

Assuming you wish to hold this directly with Vanguard rather than through iWeb's 0% platform fee, adding Vanguard's 0.15% platform fee to this fund's TER still only gets you to 0.23%. Are you sure you are making apples-to-apples comparisons here?



I have finally received a response from HSBC regarding my query regarding their Cost and Charges Disclosure Document GB00B80QFW04 which shows the total charge at 0.41% as detailed in your link above and the actual percentage as I charged at 0.52%. The following is my query followed by their reply:

I have a query regarding the TER for the HSBC FTSE All Share Index C Income class.

I can confirm that I have been speaking to a colleague of yours named Leslie regarding this issue. Your Cost and Charges Disclosure Document GB00B80QFW04 states that the total costs are 0.41% but I received a Cost and Charges Statement for my plan no. 328736*2 on 18th April for the period 17th January 2018 to 16th January 2019 that I had in fact been charged 0.52%.

I also had a taxable Investment Funds Plan set up for about a year for inadvertently paying into two separate stocks and shares ISA’s in the same tax year. The account number was 10328736*2. The investment in the latter plan has now been amalgamated back into my ISA 328736*2. However, I received a cost and charges statement on 28th May for the latter plan for the period 3rd January to 25th October 2018 which shows that the total costs were 0.41% which concurs with the Cost and Charges Disclosure Document.

I understand that your colleague Leslie (or Lesley) has been on holiday but I am expecting her to call me this week to let me know if she had heard from your back office regarding this issue. It was in fact Leslie who originally brought to my attention that there was a discrepancy between the Cost and Charges Disclosure Document Cost and Cost and Cost and Charges Statement. I had initially rang only to query the fact that I was being charged such a high TER of 0.52% and was exploring the possibility of transferring to another provider.


I’ve now received confirmation that the values quoted on the statements are correct. The value of 0.41% is for the shorter interim period (3 January 2018 – 25 October 2018), which is why it’s lower. Whereas, for the full year (17 January 2018 to 16 January 2019), the total charges came to 0.52% (this was made up of 0.12% Ongoing Costs and 0.15% Transaction Costs, plus the 0.25% Account Fee (Service Costs)).

I’m sorry that the charges have come out higher than the charges quoted on the Costs and Charges Document, which shows a likely Total Cost of 0.41%. I queried this before, as the difference was high, and our Product Managers have informed me that the information is correct. The ex-ante figures shown on the Costs and Charges Disclosure Document and the ex-post figures shown on the statement will often be different because they are potentially considering estimated costs versus actual costs. However, there is a specific point to highlight for the FTSE All-Share Index Fund.

The FTSE All-Share Index Fund aim to track an index. This means that they invest in the shares of companies that are part of the relevant index (i.e. the constituents of the index). The constituents of the FTSE All-Share index include ‘closed-ended’ investment companies or trusts that may in turn invest in private equity, real estate etc. For example around, 57 constituents of the FTSE All-Share Index Fund representing around 19% of the index are closed-ended investment companies. These investment companies have their own operating costs. The MiFID ex-post cost figures for the FTSE All-Share Index Fund take account of the operating costs of these investment companies where held. This represents a change to how costs are disclosed and the ex-post cost figure is therefore higher than the OCF found on the KIID document, for example.

Once again, I’m sorry that the values on the documents were different and it must have come as a surprise to see you had paid higher costs than you were expecting. The Service Costs (Account Fee) is collected from you each quarter by selling units from your ISA; the amount we collect to cover the Account Fee will appear on the statements we issue every quarter. However, you won’t see the Product Costs on any other statement and they aren’t debited from you; these costs are taken from the underlying share price.


Your thoughts would be much appreciated.

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Re: Charges

#236094

Postby TedSwippet » July 12th, 2019, 9:11 am

mao44 wrote:Your thoughts would be much appreciated.

In brief, with the FTSE all-share index you hold some stock directly, and other stock through an intermediate. This intermediate investment trust adds a second layer of costs. An analogy might be owning a big pile of raw peas but also several other packed and frozen bags of shelled peas. Same number of peas as a slightly bigger pile without the bags, but with the bags you have an added processing cost that you may not want or need.

It's a bit of a flaw in the index. Ideally one would want something that tracks the FTSE ex-IT index, but offhand I'm not aware of a commonly used fund or ETF that does this. My sense then is that Vanguard and other FTSE all-share tracker fund providers will have this same added cost embedded, so no avoiding it by switching to another simple FTSE all-share tracker.

Nice to have the cost discrepancy explained, anyway. Thanks for chasing it down to the bitter end, and for updating the thread. Just curious -- did you move away from HSBC's platform to iWeb or other yet?

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Re: Charges

#236115

Postby mao44 » July 12th, 2019, 10:15 am

Thanks for your response Ted. No not yet. I have been contemplating moving to Vanguard but what is putting me off is the fact that I will need to sell my HSBC holding down to cash before I transfer as they don't do it in specie. So I could be out of the market for a few weeks and sods law the market will have a correction down the day I send off the transfer form and will move up the day after my holding is sold down. :(

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Re: Charges

#236149

Postby Alaric » July 12th, 2019, 11:40 am

mao44 wrote: I have been contemplating moving to Vanguard but what is putting me off is the fact that I will need to sell my HSBC holding down to cash before I transfer as they don't do it in specie.


Can you not switch to Vanguard funds on your current platform? If you then wanted to move to the Vanguard platform, you would presumably stay in the market whilst the transfer took place.

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Re: Charges

#236194

Postby TedSwippet » July 12th, 2019, 2:07 pm

Alaric wrote:Can you not switch to Vanguard funds on your current platform? If you then wanted to move to the Vanguard platform, you would presumably stay in the market whilst the transfer took place.

Probably not. HSBC's platform only supports a limited range of fund providers, and (perhaps unsurprisingly!) Vanguard is not one of them.

https://www.hsbc.co.uk/investments/prod ... tre/funds/

Really, it's the platform rather than the fund that seems to be the main issue here. Moving the existing HSBC holding(s) to iWeb or similar should solve most of this, and at the same time allow for relatively quick (one day turnaround) transition from HSBC to Vanguard if still desired. The other part -- investment trusts lurking in indexes -- is probably pretty much the same no matter which common FTSE all-share tracker fund or ETF (HSBC, Vanguard, BlackRock, whoever) is used.

I'm not sure why the OP is more attracted to moving to the Vanguard platform (0.15% annual charge, Vanguard funds only) rather than holding Vanguard or HSBC on iWeb (0% annual charge, choice of many fund providers, including Vanguard and HSBC). To me, iWeb seems like the obvious choice, but perhaps they have their own reasons. Maybe regular or frequent investing, for example? -- that would be £5/trade at iWeb but free at Vanguard, and could swamp a 0.15% annual fee if the holding balance is low enough. In that case, compare Lloyds Sharedealing Direct and Halifax Sharedealing Services (these and iWeb are really all the same company under the cover anyway, just with differing price points and probably offering reduced regular trading rates).

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Re: Charges

#236200

Postby Alaric » July 12th, 2019, 2:35 pm

TedSwippet wrote: The other part -- investment trusts lurking in indexes -- is probably pretty much the same no matter which common FTSE all-share tracker fund or ETF (HSBC, Vanguard, BlackRock, whoever) is used.


There are FTSE 250 and FTSE 350 Indexes which exclude ITs. If there's one for the all share, it's not widely used. In fact you only want to exclude ITs to the extent that they invest in UK shares. Some of the larger ones, Fidelity China and Fundsmith springing to mind invest outside the UK anyway.

I'm not even sure of the logic of trying to isolate and disclose the costs of running ITs when no similar effort is made to find out the costs of running, say, Unilver.

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Re: Charges

#236243

Postby TedSwippet » July 12th, 2019, 4:05 pm

Alaric wrote:There are FTSE 250 and FTSE 350 Indexes which exclude ITs. If there's one for the all share, it's not widely used. In fact you only want to exclude ITs to the extent that they invest in UK shares. Some of the larger ones, Fidelity China and Fundsmith springing to mind invest outside the UK anyway.

Yeah, this bothers me more than perhaps it should. It's more the overlap than anything else. I'm paying a fee to hold every share in the index, but some of those 'shares' are really just baskets of other shares that I already hold. It all looks a bit incestuous, not to mention potentially fractal (turtles all the way down!) from the exterior, and the fact that it comes with added fees rankles slightly.

Still, overall the charges for FTSE all-share tracker funds are tolerably low, at least compared to actively managed ones. And the cost of buying enough of the underlying shares to have a crack at mimicking the index would be much more. It's just that as a passive 'purist', I still have not entirely squeezed somebody else's likely dodgy stock picking selection (and their salary!) out of my holdings.

Alaric wrote:I'm not even sure of the logic of trying to isolate and disclose the costs of running ITs when no similar effort is made to find out the costs of running, say, Unilver.

I think the only logic here is because MiFID 2 and PRIIPs apparently say that is what has to happen. It's a reason, just not a good one.


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