Investing through broker or direct?

[VikingAlchemy]

I am going to invest in a tracker fund. (Ftse all share legal and gen). What are the pros and cons of using Hargreaves Lansdown as opposed to going directly to l&g if any? Sorry if this is a simplistic question, just want to make sure there are no pitfalls.
Thanks.

[mc2fool]

I am going to invest in a tracker fund. (Ftse all share legal and gen). What are the pros and cons of using Hargreaves Lansdown as opposed to going directly to l&g if any? Sorry if this is a simplistic question, just want to make sure there are no pitfalls.
Thanks.

I can't find an L&G fund called "FTSE All Share", do you mean their "UK Index Trust", https://www.legalandgeneral.com/investments/funds/full-fund-range/equities-index-tracking/uk-index-trust/ ?

If so, an ongoing charge of 0.48% is pretty high for such a common or garden tracker and I'd suggest you consider alternatives. If that's not the one you are referring to then it'd be helpful for folks replying if you were specific about the one you are considering. If you could quote the ISIN that'd be most helpful (usually found in the Factsheet, amongst other places).

In answer to the general question, of HL or L&G, you have to consider the platform charges, that is, what they will charge you for buying and holding investments (in addition to the charges of the fund itself). I have no idea about L&G's charges, but HL charges an ad valorem fee of 0.45%pa of the value of your holdings for funds, which is one of the highest around.

Ad valorem fees are ok if the value of your holdings is small but become pretty expensive if they're not ... and of course you hope that even if they start small they'll become less so over time. In that case flat fee brokers can win out. It'd be helpful for folks replying if you could give an idea of the sort of £ amounts you are thinking of investing, along with your planned investment pattern.

[scrumpyjack]

Invest in an ETF Index Tracker and not a Fund. HL, like other brokers' have a maximum annual charge for ETFs and Shares (£200).
eg Vanguard or Ishares have suitable ETFs

[scrumpyjack]

I should have said the HL fee being capped at £200 is for pension plans. the cap on ISA's and normal personal accounts is only £45 I think.
Also they periodically have cash bonus for opening an account which can be quite an incentive for larger amounts.

[VikingAlchemy]

Yes it's the UK Index fund (GB0001036531)
I'm only intending to invest a small amount (10k) but it will be left for at least 7-10 years.
Thanks for the replies so far. I think I need to do a bit more research (into EFTs for instance)

[mc2fool]

Yes it's the UK Index fund (GB0001036531)
I'm only intending to invest a small amount (10k) but it will be left for at least 7-10 years.
Thanks for the replies so far. I think I need to do a bit more research (into EFTs for instance)

You should certainly look into other options, including ETFs, however do also look into other tracker funds (OEICs/UTs).

For example, the Vanguard FTSE U.K. All Share Index Unit Trust has an ongoing charge of just 0.06%pa (no, I haven't slipped the decimal point! ), which is less than any of their ETFs.

You also need to look into platforms/brokers and, as noted, there's basically two kinds, annual % fee and flat fee. The former usually have no charges for buying and selling funds but do have dealing fees for shares & ETFs, etc, while the latter charge dealing fees for funds as well as shares & ETFs, etc. As just a few examples:

HL charges 0.45%pa, so your £10K investment would cost £45pa, year in year out.
Vanguard charges 0.15%, so your £10K investment would cost £15pa, year in year out.
IWeb charges nothing to hold your investments but charges a one-off £25 signup fee and a £5 dealing fee when you buy. So, your investment would cost you £30 the first year and then nothing in subsequent years after that.

Monevator has a good list of brokers and their charges: https://monevator.com/compare-uk-cheapest-online-brokers/

BTW, one disadvantage of investing directly with a fund/ETF provider (like Vanguard or L&G) is that they only offer their own products. So, if at some point down the line you decide to swap into another provider's fund/ETF you can't within their account.

[hiriskpaul]

There are 2 "gotchas" to watch out for when investing in OEICs/Unit trusts. The first is the platform fee, which has already been mentioned. Make sure you fully understand this when choosing your broker. Hargreaves Lansdown is amongst the most expensive in terms of platform fees, but charge nothing for buying or selling. iWeb on the other hand charge no platform fees, but have an upfront cost for account opening and £5 each time you buy and sell. However if you are investing 10k, iWeb work out cheaper than HL within a year.

L&G don't have a platform fee or trading fees, so why not use them? This is where the second gotcha comes in. If you go to L&G they will sell you "Retail" class shares (R class). But if you go to either HL or iWeb you will be able to buy cheaper "Clean" class units (I class)*. In the case of the L&G UK index tracker, the ongoing charge on the retail units are 0.48%, but the ongoing charge on the clean class units are 0.1%. So odd as it may seem, if you want the L&G tracker, you are better off not going direct. Unfortunately this sort of thing is not at all uncommon and has been going on for years despite various attempts by regulators to stamp it out.

Better still, buy the Vanguard or Fidelity uk index tracker and pay an ongoing charge of only 0.06%!

* just to add to the class confusion, HL have negotiated a deal with L&G where HL can offer access to ultra clean C class units with an ongoing charge of only 0.04%. However, HL will charge you 0.45% per year on top.

[hiriskpaul]

I know you said you wanted a UK index tracker, but I have to ask why? The UK stock market makes up less than 10% of world stock markets, so you might want to consider diversifying globally instead of sticking to companies that just happen to list on the UK stock market. Fidelity do a developed world tracker with an ongoing charge of 0.12%.

[VikingAlchemy]

Goodness, I'm so pleased I posted this topic! I really need to do some more research. Who would have thought investing in stocks and shares could be so complex?
My reason for plumping for a UK fund was that the consensus seems to be that it is undervalued atm. I was originally thinking of an S&P 500 fund but conversely this seems to be fully valued (so I have read!). I now will have a look at global funds also as mentioned by hiriskpaul. Also a monthly investment might be more sensible - pound cost averaging I believe is the phrase.

[Lootman]

I know you said you wanted a UK index tracker, but I have to ask why? The UK stock market makes up less than 10% of world stock markets, so you might want to consider diversifying globally instead of sticking to companies that just happen to list on the UK stock market. Fidelity do a developed world tracker with an ongoing charge of 0.12%.

Actually it's worse than that - the UK is not close to 10%. It is about 5%. A global equity index fund should have a regional breakdown that looks like this, currently:

US: 55%
Europe ex-UK: 15%
Emerging Markets: 10%
Japan: 7%
Australia/NZ/Developed Asia 5%
United Kingdom: 5%
Canada: 3%

[JohnB]

HL ETF charges are 0.45% with £200 cap for SIPP, £45 for ISA, but charge nothing for unsheltered ETFs.

If you want to learn more visit monevator.com. I used to use LangCat for their broker comparison tables, but they seem to require a sign-up with marketing now, even if its free,

[nmdhqbc]

HL ETF charges are 0.45% with £200 cap for SIPP, £45 for ISA, but charge nothing for unsheltered ETFs.

See full fees below. So for Exchange Traded Funds you also have to pay £11.95 to buy and sell. £200/£45 cap is mentioned a few times above as if it's a good thing but not for me. iWeb is £25 one off and then £5 a trade thereafter. Much cheaper.
https://www.hl.co.uk/investment-service ... nd-charges

[Hariseldon58]

For holding funds iWeb is often mentioned as being low cost , it’s worth considering Halifax Share Dealing, ( iWeb is part of Halifax) charges can work out well...

No joining fee, they have cheap dealing options as well....

Whilst a global investing approach is a great idea, for a new investor investing today, there are one or two gotchas..

The value of sterling is closely linked to the Brexit outcome and U.K. stocks are presently unloved to a degree....

Timing the market is tough but the present circumstances are unusual and for the new investor ploughing all into the market today, depending on their investment choices they might take a hit or gain a bonus depending on their initial investment choices and how Brexit plays out... perhaps a foot in either camp ? Vanguard Life Strategy 100 perhaps with its Global remit and UK bias could be a compromise or putting the initial investment in spread over a few months ?

With a 7 to 10 year outlook all this will be a dim memory at the end but early volatility can be unsettling...