Interactive Investor wind their necks in about exorbitant charges

Not as far as reversing the exorbitant charges, but at least to let you show a clean pair of heels at no cost…

Looks like the angry hordes of Monevator’s men and Martin Lewis’s moneysaving experts have brought some pressure to bear in iii, formerly known as a reasonably good deal execution only broker until chief exec Tomas Carruthers and his band of merry men had  brainstorming meeting on the topic of ‘how can we make more money’ resulting in a sudden rush of blood to the head and this arrogant missive to the punters.

They’ve shown some contrition vis-a-vis their previous customers, who were hacked off at being charged £15 per line of stock to get the hell out of there. They’ve softened their tune. This is what their website said at 19:00 7 June 2012 (just in case they change it)

Transfer charges

We are confident that for the majority of our active investors our new pricing plan represents great value and is highly competitive.

There are many other customers who will find that by consolidating some of their investments with us they can further benefit their position. For investors who wish to transfer any holdings into our account we will cover transfer charges up to a limit of £100.

However, having listened carefully to our customers, we understand some of our customers have decided to move to providers who do not cover transfer charges, and some are reconsidering their financial strategy and now wish to close their investments entirely.

We have no desire to profit from customers who wish to close or transfer their account, and want to ensure all customers have an absolutely fee-free exit route.

We apologise for any undue concern or inconvenience that customers in this situation may have had.

We would like people to take the time to fully assess our offer and to consider the positive impact this could have to their investments.

If you do decide to leave us, though, please call us on 0845 200 3637 by 31 July 2012 and we will ensure you have a fee-free exit.

You can now git for nothing. Which is an improvement on the previous state of affairs, where an Ermine was going to have to eat a £225 hit to clear off with my 13 lines of stock and two index funds. It’s cheaper to eat the transfer charge than take the £10 sell charge on iii and the £10+ charge of rebuying plus the 0.5% stamp duty. Which is A Good Thing.

III are still desperately arrogant and think their customers are stupid however. In their advertising they trumpet that the FT made them Deal of the Week on the 2nd of June. I don’t know what they were smoking or whether money changed hands because my freebie FT articles are used up. More disingenuously, iii then chortle about kudos from Which magazine in May

what others are saying about iii ( on 7 June 2012)The May issue of Which magazine ranked us first out of 23 fund supermarkets. See a summary of the report online at the Which Magazine website.

Well Tommo Carruthers, one of the biggest downers you did was start charging dealing fees for funds, punk, so Which magazine was reviewing on data that is now false. To wit-


Ermine annotated copy of Which website about iii

Strangely enough iii’s link to which didn’t work so this one probably won’t either. I got there by searching for fund supermarket on Which’s site. I took that snapshot on the 7 June 2012 at 19:40.

So what exactly is the point of index funds in today’s market then, when ETFs give you an immediate price as opposed to forward pricing?

I’ve gone right off funds, from this experience. From my POV the whole point of buying funds was you could do it in itsy-bitsy pieces over time pound cost averaging and all that jazz, and the absence of dealing fees was what made it possible. If you’re going to be eating dealing fees on iii then heck, just buy the ETF a good honest share. Looks like fund buying is either going attarct dealing costs or going to have to be purchased in much bigger lumps than £100 or so.

So I investigated TD, because several people recommended them from my earlier snarl about this, and then TA from Monevator delivered the ultimate recommendation. So I opened a regular account with them to test the water before moving. Only to find they are fee-free on funds, but you have to buy funds in £500 lumps so some of this idea goes west. Fair enough, maybe that’s taking the piss, but even so, with £10k a year ISA allowance you’re only going to be able to get 20 slots so better not be trying to pound cost average more than two funds eh? TD do also support a regular investment which is batched on two Wednesdays a month where the limit is lower but you have to set up a steady payment. My income will be more variable so I don’t want to do that, I’ll still invest the whole ISA in a year but want to be in charge.

What was nice about iii was I could buy £100 of HSBC FT allshare index each month  and £100 of Legal and General Global every other month dealing charge free. All that’s been canned now.

From a fees POV I’d be okay with staying on iii and simply selling out my funds and considering buying an ETF say six-monthly on the £1.50 batch job price. However, iii have done a classic example of how not to change fees. It doesn’t affect me enough to want to move on its own, but the arrogant cockiness of Tomas Carruthers in his original mail telling me how I should trade just doesn’t make me want to do business with them.

III also made a right pig’s ear of switching from a Halifax white label dealing platform to their own, they take ages for dividends to show up and the latency of fund purchases (from order placing to execution) has become glacial relative to the current febrile state of the markets. However the real reason I want to move is that I don’t like the reports of the unsatisfactory financial state of the company. I’m too tight to buy the Companies’ House report on them to substantiate the claim but added to Carruthers’ bad attitude I don’t want to be there any more. So hello TD here I come. At least it shouldn’t cost me anything to switch. And TD seem to limit their transfer out and close cost to £55 at the moment, which beats iii’s original £225 exit charge.

All of this seems to have come about because the FSA is trying to stop companies using kickbacks and backhanders from actively managed funds to reduce platform costs. Investing is going to get a little bit more expensive and a little bit more inconvenient from here on because this subsidy is going away. Gee thanks a lot, guys.


21 thoughts on “Interactive Investor wind their necks in about exorbitant charges”

  1. The gesture of waiving exit fees by iii is welcome, although the cynical part of me can’t help wondering why you have to call them to get it enacted.

    Will Derren Brown be on the other end of the line, I wonder? 😉


  2. Only Tomas Carruthers himself will do I’d say 😉 I was surprised at the power of popular protest, I’d resigned myself to sucking my gut in and taking the £225 punch. So well done and thank you to you, TA and Martin Lewis’s angry hordes.

    Sometimes I’m beginning to wonder whether as a basic rate taxpayer scumbag an ISA is worth the candle, a regular trading account is easier to move. Then I think of the increases taxes a more hard-pressed UK government will come up with in the years to come…


  3. You can buy £50 worth of funds from TD Direct in the regular investment ISA. And as you don’t have to buy anything every month, it’s effectively a min contrib of £50, whenever you feel like it.


  4. This makes me glad I live stateside. Trading fees are much lower (I pay $4.95 for fast and efficient trades) and AFAIK we do not have the stamp tax thing.

    If for nothing else, the US is an attractive place to be a passive investor due to the greater competition (?) among financial service firms.


  5. I just want to say a HUGE thank you to your good self and the likes of Moneyvator/TA for the valuable knowledge you have all shared so that we may do our best to dodge this iii farce. Your efforts are truly appreciated!

    I too am concerned as to the financial health of iii and as such am pondering an exit. Hypothetically were the company to collapse, what is the risk to customers investments within an ISA product i.e. is there any protection from the FSCS scheme? The link over on Moneysaving Expert is not particularly clear on the matter with regard to investment brokers.


  6. @Richard, yep, I’m jealous 😉 Scale has its advantages in other ways, f’rinstance the S&P500 isn’t as concentrated sector-wise as the FTSE100 which is now all oily and miney and pharma whereas it was bank-heavy pre 2007.

    @SQLBrit the thing to watch out for is the 50k limit as opposed to the 85k limit on cash. Beats me what happens if you have 80k with Barclays as cash and 40k in a S&S ISA with them.

    Also having your stocks protected is not exactly the same as having your cash protected – when is the 85k evaluated? It has a different meaning just before and after a market crash – it goes a lot further after…


  7. @ermine – I thought that most investment brokers set it up so that the money was not accessible to creditors. If they were able to use your money to pay creditors I’d not be too happy, because unlike a bank where they take my money and lend it to someone else, I directly lend it to a company and their job is just to match us up, so the risk should be in the company I am investing in, not the broker I am using. That said, this sounds far too logical for the modern world of banking / brokering.


  8. @Rob, that’s how it should work. However, the FSCS protection feels worth having in troubled times, and certainly once my ISA reaches about 45k I will use a different institution for future years, even though that hampers rebalancing etc.

    Then there’s the secondary issue of a frozen, though guaranteed stock market ISA could cause knock-on costs, say you were going to invest into the forthcoming Eurocrash. You can define the cost of a frozen cash account while the FSCS sorts you out, as the cost of borrowing the frozen account over the outage. You can’t define the cost of a frozen S&S account.

    I wouldn’t necessarily move from iii because of the fees change. I am considering moving from them due to what looks to me like a marginal company.

    If there’s one lesson that can be learned from recent finacial upheavals, if you’re going to panic, do it fast, with conviction and early, let the devil take the hindmost 😉


  9. I agree, the main reason for now moving from ii (been with them over 10 years) is the fragile state of the business combined with poor management decisions.

    Their attitude over the way this has been handled demonstrates a knee-jerk panic reaction which probably stems from fear of financial instability – not a good sign when you are handling millions of GBP for many thousands of customers.

    Their reputation is now severely damaged and any integrity they may have possessed is lost.

    My transfer out request is in the post – moving to Sippdeal.


  10. I smell a rat:
    Interactive Investor was formerly operated by Halifax Sharedealing LTD and had the same adresses in the early days of its operation!! Now there is Iweb which offers a very similar “low cost investing image” and surprise surprise it too is operated by HSD. Will Iweb rake in the customers and several years down the line will their fees increase?


  11. @cautious liz A bigger reason for iweb’s fees to change is probably the retail dristribution review (RDR). That will probably make a lot of investing more expensive as the kickbacks from funds to platform providers is disallowed. Unfortunately my investing pattern was such that I benefited from other people’s funds.

    I think iii used HSDL for their platform but decided (wrongly) they could do better. It’s a little bit unfair to blame HSDL for iii (or iWeb’s) business decisions 😉


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