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.

     

    4 Aug 2012, 12:01am
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  • Why does it take so long to move an ISA?

    I have an ISA with iii, who jacked up their prices, in particular charging for funds and generally carrying on in a cavalier fashion. So more than a month ago I initiated a shift to TD Direct, telling both iii and TD, and filling out the relevant forms. iii at least revoked their exit charges for aggrieved customers transferring out who didn’t like the unilateral hike in fees.

    So far, the transfer still hasn’t competed, though it is within the specified time of six weeks. What the heck is the reason in this day and age for a transfer to take so long? I am transferring as stock rather than cash, but I now have an additional challenge in the form of a share certificate from one of my sharesave schemes that I want to shift into the ISA. I don’t dare put any money or stock into the TD ISA while the iii one still has anything in it, for fear of being hauled up by HMRC for double dipping. In fact all in all the process of transferring share accounts, within or without an ISA seems tediously drawn out and grief-stricken.

    I have a ESIP shareholding with Equiniti that I want to shift to TD in a non-ISA wrapper because Equiniti have outrageous selling fees that are avoided by transferring out within 90 days of vesting. However, The Firm’s shares are going XD in a few days and I’m avoiding a move over the XD period. There still seems plenty of opportunity for the transfer to make a right muddle of things between the XD and dividend payment date in a month’s time.

    What I need is a good Coffee Can

    The whole point of nominee shareholdings was to make computer transfers easier, but my experience of the ISA transfer is beginning to piss me off about holding shares in this way. If I can’t find a way to transfer the sharesave amount into my ISA I will hold the damned thing as a share certificate; it’s a large enough holding to be worth a grand a year in dividend income. The stock is good enough for Neil Woodford’s top ten which my HYP seems to have ended up being perilously similar to so it’s good enough for me as a core holding.

    Although paper is so yesterday, it has some attractions – it doesn’t mess you about to change nominee accounts and it doesn’t charge you any quarterly account fees. Account fees seem to be where nominee share accounts are going to – and I have become accustomed to not having them over the last few years. Guess I was freeloading on all the guys holding active funds, and this cross-subsidy is being banned by the Retail Distribution Review, which as an unforeseen consequence is going to shift the balance from electronic to paper for long term holdings. For a share that I’m going to sit on for a while as I build up my HYP ISA around it to get my sector allocation back into line there’s much to be said for paper. What I now need is a good can to stash these in, as described by Robert Kirby in his 1984 article ‘the Coffee Can portfolio” – basically stick share certificates in can, collect £1500 a year tax – free (when the second sharesave comes out in December to join this one) and forget about the tin. He said in 1984

    You can make more money being  passively active than actively passive

    Something the III experience has shown me is I want some diversity in nominee providers, and having no nominee for a significant holding is one step towards that. That way if I fall out with a nominee provider I don’t end up with my entire income stream held up to ransom. This isn’t easy with small accounts of < £10k each because you often get tapped with account fees below a certain size (with TD it seems to be £7500), and ISAs in particular are a pain to have spread around. However, I’m out of that limitation now, and after next year I will probably leave my HYP as it is and switch future years contributions to some sort of Vanguard lifestrategy fund if RDR hasn’t made funds expensive to hold. That will probably necessitate starting up with a different ISA provider to get access to the Vanguard fund.

     

     
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