20 Jun 2013, 10:54am
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  • Aaargh – More RDR fallout as TD does an Interactive Investor on me and starts charging to hold funds

    …Bastards. I am getting close to the point where I’m just going to get out of funds. Period. I’ve never liked them, preferring the ETF variant, but used them because, well, they used to be cheaper because you didn’t pay dealing costs or holding costs on ’em. The RDR has now buggered that up something rotten.

    One of the secrets to reducing costs in the modern world is to shoot anyone who wants to have a regular dib in my accounts. I have no Sky TV, I have a PAYG phone and I just don’t do regular payments for anything where I can help it.

    So when Interactive Investor decided they would charge me regularly to hold an ISA with them I told them to get on their bike. They also did some dodgy stuff in the runup to that, like charging to buy funds as if they were shares, which TD haven’t stooped down to – yet. Now TD deliver themselves of the following by email, linking out for more detail

    Extending our Platform Fee across all Funds (Unit Trusts and OEICs)

    If you hold funds with us, you may be aware that we introduced a platform fee of 0.35% in July 2012 on trail-bearing funds paying trail commission of more than 0.5% annually. As well as rebating all of the trail commission we receive on these funds, since July 2012, we have also introduced a range of clean funds, which do not contain trail, meaning more of your money stays invested in your fund portfolio. We now have over 1,500 clean funds on our platform. If you already hold trail-bearing funds with us, we will be writing to you soon to let you know how you can convert to clean funds in the next month.

    We will continue to rebate the trail commission we receive, however we wanted to remind you that from 1st August 2013 the platform fee of 0.35% per annum will be applied to all fund holdings (Unit Trusts and OEICs). This will be accrued daily and charged twice a year on or around 1st January and 1st July.

    So that more money staying invested in the fund portfolio is going to come out again to go into your sweaty mitts, is it, chaps? I am fed up with the endless nickel-and-diming associated with funds as all these hangers on want a slice of the pie. There’s something good and honest about shares and ETFs there – you pay to buy them and you pay to sell them but otherwise they just sit there. You don’t pay to hold them, you don’t pay to get the divi if any, they don’t cause any trouble. Like my phone – If I don’t use the damn thing it doesn’t cost me any frickin’ money. I like that in products and services. So no thanks, TD, bollocks to your platform fee. The only funds I hold are an HSBC EU fund and a Vanguard FTSE DEVxUK. I may out that EU fund and buy the Vanguard Developed Europe ETF, and upscale the holding since the HSBC one is a paltry £800. At the time I had a fond idea of drip feeding to build up a holding. I only built up about six months at £100 a go before iii decided to charge to buy funds which put the kibosh on that plan leaving me with a legacy rump holding.

    The Dev Europe ETF has about 30% UK exposure, but lifting the lid on what’s in the index it so happens that GSK is the only firm in the top ten that I hold, and marching through the list of constituent parts on the FTSE website totting up the weight of everything that overlaps with my HYP the overlap is only 5% of the total in the ETF. I can live with only 95% diversification to ditch the yearly thieving paws in my portfolio. The TD annual charge of 0.35% on funds is more than the 0.15% TER of the ETF for crying out loud. And yes, obviously I will eat 0.5% stamp duty plus £12.50 (or £25 on the turn in and out) so on about £2500 of this it would take me seven years to get ahead of the charge. It’s not unreasonable to expect to hold that sort of fund longer, however, and I don’t want to carry passengers. I don’t mind paying for the ticket to get on and off, but that’s enough for me.

    Over the coming years I will add to that holding, and I haven’t yet worked out whether it is better to build up a drip feed holding in the fund and then sell up and convert it into a lump ETF holding of the same sort of thing once I have stopped ISA accumulating in about ten years.

     

    Remember their original e-mail when they started altering their fee structure ages ago explains that you can move out for free if you leave because they change their fees.

    Plus, don’t forget that you don’t pay stamp duty on ETFs.

    I don’t think the deal with TD is bad. Remember, HL charge you 0.5% up to £50 a year or so just to hold shares. Surely you’ve been expecting this move from TD for the last year? I certainly have.

    My approach is to dribble into OEICs to give me a liquid bucket, (though a number of my OEICs are active so this RDR stuff is good for me) but every so often, sell them down and make an ETF (or CEF) part of my monthly trade. (The TD regular dealing thing is great for this, I don’t think the others offer the same deal.)

    Therefore, your fee, assuming you can get the ETF you want through the monthly dealing, would be £1.50, at the cost of being out the market for a short while. A pretty good deal if you ask me!

    Greg

    Hi Ermine,
    Nice rant, but watch your blood pressure.
    Have you thought of The Share Centre.
    Reasonable charges and so far have been reliable.
    If you buy 500+ Shares in the company they reduce their dealing costs by 30%. Also their scale of chares are very transparent.

    https://www.share.com/

    End of advertisement.

    A 1% dealing commision AND a quarterly (at least this ones flat)fee? That’s horrendous.

    @Greg that strategy of dripping into fund and them xferring to an ETF in a lump has much to be said for it. I was kind of feeling my way there at the end but you’ve put it much better.

    And let’s face it, the opportuunities for buying in seem to be manifesting today and hopefully for a little while yet!

    I’m happy with TD for shares, though I need ot start with another ISA provider next year due to the FSCS limitations

    @Lupulco TSC looks interesting for a second provider next year!

    @Mucgoo the OEIC dealing charges were on iii, TD have now added this annual percentage charge but no dealing charges at the moment…

    I have enough capital gains embedded in my unwrapped TD fund holdings, all HSBC trackers, that going to ETFs would be horrifically expensive. I also hold enough to make the 0.35% fee hugely prohibitive. I queried TD over the reasonableness of this, but don’t realistically expect them to relent, so I foresee I will be moving my holdings ‘in specie’. The question is, to whom?

    I probably have to pick a flat-fee broker. BestInvest currently look like a decent pick, with SippDeal and Alliance Trust as runners up. The worry, of course, is what happens if they also inflict RDR pain later on.

    I also have an ISA as TD. That is around 70% ETFs, and could easily go 100% to avoid the new (disgusting) fee. I’m currently vacillating on whether to leave it in TD or move it also while moving is free, as protest and/or protection against future TD changes.

    Hi:

    Wish I had such problems but I’m skint. Beware of Canadian banks. They love fees. TD is probably the best for not doing fees but they will incrementally creep. I think since I can live virtually through you that buying good dividend paying stocks through DRIPs makes a lot of good sense but you end up paying fees to transfer money to buy them. If you want an international DRIP why not try Johnson Controls ? Just a thought. Cheers, love your columns !

    But eventually, all platforms will be charged to hold funds. Shame but there you go. That is what happe. Come to think of it, my biggest worry is not the funds but the shares. Surely, it is almost inevitable that they will charge monthly for the value of all your share holdings.

    That would be a shame as it is really useful not to worry about monthly or annual charge on share dealing account. Just buy them with dealing charges and withdraw them onto paper. This is why holding paper shares excel! No charges apart from one or two odds stamps (which is getting pricey these days!)

    I actually do hold a fund, which is a Neptune Africa Fund but I held it directly with Neptune and while it is annoying to see a high internal charge and annual charges, it is nice to get a statement from them in a folder along with reports on how they are doing. And more importantly, I do not have to worry about some fund broker always potentially increase their charges!

    Cheers,
    Joe

    @JSP I did actually take this policy of share certs for some of my holding of The Firm, and it would be a very dark day indeed if monthly charges applied to hold shares.

    The trouble with share certificates is you have to use a nominee account if you want the tax-shelter of an ISA. As Jumper highlights above, these changes mean that you either have to stick with eating the charges or eating the tax hit.

    You can argue that the aim with a HYP in particular is never to sell, however you can’t avoid corporate actions that may sometimes force you to crystallise a CGT liability. You might be able to rebalance an non-sheltered porfolio if you do it slowly over years, but M&A activity could screw you.

    Now I don’t have a portfolio that’s big enough for that to have been an issue with anything in my ISA to date, but in 2023 when I will probably cease being a yearly ISA buyer those CGT issues would probably mean it’s worth having taken the running costs with the tax shelter.

    @Jumper looks like the market will polarise between flat-fee and percentage fee structures. There’s probably a case for jumping 🙂 sooner rather than later ,though TD’s exit fees aren’t too bad because they are fixed per line and capped in total ISTR.

    @g We don’t have the tax issues on dividends that I think you guys have. I actually simply allow the cash dividends to accumulate and then buy something else with the amassed totals, I don’t use dividend reinvestment in the same firm. That was slooooow at first but it’s a lot better now as the capital amount has increased. I use that as a coarse steering for diversifying.

    23 Jun 2013, 1:33pm
    by AlwaysLearnin

    reply

    @Jumper

    You say you might move your ISA “while moving is free”. I’m also thinking of moving but couldn’t see anything about them waiving fees. Have you seen anything to say they will? If so, where?

    Thanks

    @AlwaysLearnin, it was in the email that TD sent to (some) existing customers (I got it, but my wife did not). Copy here:

    http://www.tddirectinvesting.co.uk/email/re-pricing-email14613

    “If you decide to close your account as a result of changes to our Rates and Charges, you will not pay any exit fees if you notify us within 30 days of receiving this email.”

    24 Jun 2013, 7:32pm
    by AlwaysLearnin

    reply

    Thanks Jumper

    If you don’t use your PAYG phone, eventually the number will be disconnected, and ultimately recycled to a new customer. Providers of services have to make some money, somewhere.

    You need to be looking at flat-fee plstforms, unless your holdings are small (sub £30k), in which case the percentage-based fees are a boon (more technically, a cross-subsidy from rich, lazy, stupid investors on the same platform).

    Get some clue at the Lang Cat’s platform-pricing analysis: http://langcatfinancial.co.uk/2012/08/the-lang-cat-guide-to-platform-pricing-now-live/ (although that report’s really for intermediaries, it makes the priciples clear. Retail investors need to do their own research).

    In any case, what’s wrong with using the Monevator’s (technicalllly: the Accumulator’s) analysis of cheap brokers? http://monevator.com/compare-uk-cheapest-online-brokers/

    Cheers!

     

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