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.

     

    31 May 2012, 9:19pm
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  • The Ermine takes the shaft from the RDR and the FSA

    Stirred from its long slumber of ages, the Financial Services Agency has decreed that trail commission has been a scam. And that It Will Stop, Forthwith.

    And I’ve just taken the shaft. Not in a huge way, but it still pissed me off. I’ve always been a firm believer that organisations that charge me money just to hold an account with them are taking the mickey and to be avoided. I don’t mind paying for a service when I use it, but paying just because the account exists hacks me off.

    Which is why I’ve used iii for my ISA. You can get more touchy-feely service with the likes of Hargreaves Lansdown but in the end as Monevator/TA keep on reminding us, fees kill your returns.

    III didn’t charge any annual fees and their per-trade charges of £10, while not the lowest were reasonable. It appears what made this possible was the trail commission on active funds paid by other people 😉

    I was dismayed to receive a missive (appended at the end of this post) to the effect that iii were going to charge £80 annually as well as £10 per trade. Geez. Thanks, guys. The only thing that is stopping me telling Tomas Carruthers to stick his fees where the sun doesn’t shine is that all other ISA platforms are probably either dearer or moving to charging annually (many others do). It is only when all this kerfuffle has settle down in a year or so that it’s worth looking at alternatives.

    Moving a S&S ISA is a major pain, because you usually get ripped for a transfer cost per holding. So you have to sell everything down to cash, so a S&S ISA transfer to new provider, and then recreate your ISA on the new platform. Or not, if you come to the conclusion you don’t want the same holdings though then you should ask yourself the question why didn’t you change this on the old platform 😉

    That of course invokes two lots of dealing charges plus a 0.5% hit on the total value from stamp duty. Even in the case of my modest 30k ISA that alone is a £150 hit, so in practice S&S ISAs are sticky because of the cost and hassle of moving. You can open another one for future year’s ISAs, but rebalancing across such an ISA estate gets hard and it’s all a right pain.

    There are other subtle changes here. For instance I will get right out of funds on iii as they are now charged at the same rate as ETFs. I will sell my HSBC FTAS trackers holding I have built up over the last year or so and buy the corresponding Vanguard ETF product. The historical fund preference over ETF logic because of the absence of trading costs has now been eliminated, and the forward pricing model of funds is not worth tolerating so I may as well minimise the TER.

    I may have to find another platform and use DW’s ISA allowance to implement this approach to Grexit  – I was about to start doing it for European index funds in my iii ISA but that’s been KO’d now. Of course, there are no guarantees that another platform may not do the same as III and start charging dealing charges on funds, so all in all I could have done without the friendly help of the FSA’s RDR to queer the pitch at this interesting time. Perhaps RDR will hammer the very raison d’etre of index funds as opposed to ETFs.

    Anyway, here’s what III have to say:

    Dear Ermine,

    Here is a message from the CEO describing just how we are going to obfuscate our previously simple offering to you. We will obscure things by bundling some services, charging more for others and complicating the process of comparing our charges with other ISA providers. Of course we are going to make out that we are doing you a favour, but basically we want you to trade a lot more often so as we get more money. Geddit? No, well, what we will do is charge you for two trades a quarter, constraining what you can do, and enticing you to churn more. Oh and we’ll wrap it all up in fluffyness of how we believe in the stuff we’ve been forced to do. Unfortunately, Mr Ermine, you weren’t using any of the funds that we were stealing some of the proceeds from every year, because you identified them as a ripoff. So you get to take the shaft, this time, buster. That OK with you? Because if not you know what you can do but it’ll cost ya. Bwahahahahahaha

    Obviously they didn’t say that, and dressed it up somewhat, but I think my version is more succinct a summary 😉 I’ve critiqued the Tomas Carruthers’ missive describing how I will be shafted in future using this colour.

    Dear Ermine

    Thank you for investing with Interactive Investor. More than ever individuals need to take increasing control of their own financial futures as successive governments and employers reduce their responsibilities in this area.

    At Interactive Investor we consider it our duty to provide you with the dealing tools and information you require to actively manage your financial future, to do so with confidence and charged at a fair price. This is why we are now announcing important changes to our charging structure to take effect from 1 July 2012.

    Funny you should say that, Tom old boy. Maybe the Ermine is getting a bit simple in his old age, but no annual fee and a straight £10 a trade charge or £1.50 batch trade sounded a lot more like a fair price than £80 a year whatever I do even if I don’t trade at all. This. Is. Not. An. Improvement.

    New Pricing Changes

    We are introducing a quarterly fee of £20, which gives you:

    The first two real time trades (funds or equities) you make in each quarter, or

    A combination of regular monthly investments and real time trades up to the value of £20 in each quarter.

    To buy or sell funds we are introducing the standard charge of £10 for a real time trade or £1.50 for regular monthly investments.

    Well that’s just pissed on the fireworks of this idea then, looks like IG index or another ISA provider may get that business instead.

    We will pass on to you ALL income we receive from any fund investment you hold with us. On a typical fund with a 1.5% Annual Management Charge, this would be 0.64% of your investment every year

    This is in addition to our existing highly competitive pricing that you will continue to benefit from:

    • Buying or selling shares at £10 per real time trade or £1.50 for regular monthly investments
    • International share trading also at £10
    • Our frequent trader rate, which allows you to buy or sell shares from just £5

    Why introduce a £20 quarterly fee?

    We believe that customers should be engaged with their investments and actively manage their portfolios. To support this, we are introducing a quarterly fee of £20. This fee is the only one we will charge you and you will not have to pay any other management, ISA or administration fee.

    Ermine thinks to himself don’t bullshit me Carruthers, you’ll still charge me a dealing fee, which is not what the only fee we will charge you used to mean when I went to school!

    If you already trade twice or more a quarter then this fee will make no difference to what you pay – it is effectively an advance payment of those first two trades for the quarter. If you are trading less than that then you will still have the right to your two trades in each quarter without any additional payment and hopefully feel encouraged to more actively manage your investments.

    Well if you don’t mind me saying, Carruthers, you are a most impudent little toe-rag telling me when and how often I should trade. While I am in no way a passive investor, I aim to be a catatonic trader once I am fully invested, and that decision is up to me, not up to you you slimy little berk. Have you ever heard of Warren Buffet’s 20-ticket punch card investing model, ya sonofagun?

    We will, of course, continue to provide you with the day-to-day custody services, including corporate actions and dividend processing, regardless of the investment types you choose.

    We will repay all income we receive from your fund investment

    We are not alone in believing that ongoing commission does not fit with independent investing. The FSA is banning it for investment business introduced by financial advisers from 1 January 2013. The FSA has not yet banned this income for execution only business, so we are leading the way by passing on all income that we receive back to our customers.

    Writing, meet Wall is what I think you meant to say here Carruthers. Did it ever occur to you that salami-slicing your customer’s property would normally be considered stealing in any other walk of life? Howsabout you give me 1% of your income to Ermine Enterprises, after all, I enable your nice li’l lifestyle Tom? No, thought not. So why did you think this was okay until you got told not to, hein?

    Still, it’s nice to see an old lag reformed, I guess, amazing what a little bit of heavy-handed regulation does to a chappy caught with his hand in the till. Any other offences you’d like the court to take into consideration?

    Our competitors may repay a portion of the income they receive but do not always make it clear how much they are keeping.

    No, you weren’t that clear on that front either until your Damascene moment, oddly enough coinciding with  when the FSA made you do it. Funny old world, Carruthers, isn’t it?

    We will pass on ALL of the income we receive on your fund investments. This can make a significant difference to your overall returns, for example:

    If you invested £10,000 each year for the next ten years, the rebate you’d receive with Interactive Investor would be worth £3,520. After 20 years, the total rebate would be £13,440. See how much you can save with our income rebate calculator

    Oddly enough this calculation never appeared before as the fact that some iii customers have been ripped to the tune of £3k over the last decade. It really is a strange world we live in today, don’tcha think, Tom?

    If you have fund holdings elsewhere, you can benefit even more by consolidating your fund investments with us.

    You do not need to take any action as these changes to pricing will take place automatically with effect from 1 July 2012. You can find out more information and contact details from the FAQs on our site.

    Continuing to improve our service to you

    We will also continue to introduce special trading days, new tools and research for trading customers to further support informed and confident trading decisions. For example:

    • Our free ISA and free US stock trading days
    • Our new mobile trading app available on iPhone and iPad being introduced this summer
    • Privileged access to trading insights and new tools coming later this year
    • Our recently launched model portfolios which invest in a range of different assets – and we’ll continue to expand this range

    All set up to jolly us along to trade more on the old ‘special offer everything must go’ model? What happened to the old KISS model you used to run round there parts?

    When we set up Interactive Investor 17 years ago it was to let private investors control their own trading activities and financial future – something that barely existed at the time.

    Hmm, and I was such a cynical sonofagun as to be under the impression you were in it for the money you could rake off rather than as such a social service. Life’s such a bitch when you’re so misunderstood Carruthers.

    Nearly two decades later the investing landscape has changed beyond recognition. We intend to stay at the forefront of that change and work on your behalf to give you better trading access, information, value and service.

    We look forward to supporting your trading and investment plans now and in the years to come.

    Yours sincerely

     

    Tomas Carruthers

     

     
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