I opened my S&S ISA in March 2009, with Interactive Investor (III). I was used to their system, had used it for shares research in my dotcom boom and bust days, and their charges were OK. What I want in a ISA platform is pretty simple. No ongoing fees, and specifically no percentage fees. I am happy to pay for buying and selling shares, not to hold them.
Before the Retail Distribution Review (RDR) this was common. Platforms made their money on kickbacks from funds. I had been educated to this problem so I didn’t have any funds. Simples. The RDR was supposed to help the common people, but I took the shaft. I was perfectly happy to have my platform costs subsidised by all those fund holders. III introduced a £80 p.a. fee, apparently for our own good. From their guff at the time
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. 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.
I’d go to IG Index if I wanted to trade, guys. That’s not me, so I jumped to TD Direct. Not without pain, indeed iii’s attempt to make money out of their 2012 switchers showed that they are moneygrabbing scum, which is something I had forgotten over the intervening five years.
Moving a S&S ISA is tedious and slow
It took ages to move that ISA, I moved it in stock format. Don’t know why we suddenly resurrect Latin and call this in specie, but that’s the convention. You have to watch it because some platforms charge a transfer out per line of stock. OTOH you get to pay the transaction charges twice if you convert to cash and rebuy. Some people say there’s the extra hazard of being out of the market, and I suppose since bull markets are longer than bear markets that’s probably the case for a randomly chosen time period.
I had five years with TD, where they generally did what I wanted them to do, and didn’t give me any trouble, other than starting to charge for holding funds. So I got rid of funds I’d acquired with TD and switched to using ETFs. That gets easier as the ISA becomes a bigger beast. I don’t really buy less than £2k of anything now, £12.50 out of that is 0.63%, on a par with stamp duty. So I take a 1% hit upfront. On the £500 transactions when I started out in 20091 that 12.50 was an ugly 2.5%, which is why everybody used funds in those days. Paying the 3% in kickbacks and fees, no doubt 😉
Having laid the beast of III to rest, the zombie comes after TD Direct and buys it up. Other TD Direct customers were more savvy than me and jumped early, I left it until III tell me they are bringing their ugly “annual fees but not if you trade lots” fee structure to TD Direct, and get caught in the crush for the exit. I initiated a transfer to iWeb end of October 2017. Every month after I chased them in their private message system and nothing happened.
They did sod all for ages, to the extent I had to ask iWeb for an extension in February as they were going to give up due to not response from III. Then III had the temerity to charge me the first £22.50 quarterly fee in January. In February I rang them up and invited them to shift their ass, give me my £22.50 back, and compensate me for the time and aggravation of pushing a process that should take six weeks (why so long?) but which was now three months and counting.
It seems the online comms are a waste of time with III. Ringing them up unblocked this, and in the end they paid me £75 compensation, after I requested they put this into their formal complaints process as a precursor for a financial ombudsman case. So I am now shot of III – again.
Is there a big picture I’m missing?
This was a lot more painful than last time because this HYP ISA has increased massively since 2012 because of the nine-year bull run. I stopped adding to this ISA after 2015, switching to Charles Stanley and a regular world ex-UK2 index saving, because I wanted to spend less time obsessing about shares. HBR has a point that
“My experience is what I agree to attend to”
Index investing with CS is pretty damn boring and lacklustre3 compared to that HYP, but then starting the HYP in early 2009 and quitting in 2015 is probably an easy win for excitement. It’s tough to see the opportunities at the moment, what with the house purchase I haven’t committed any of this year’s ISA contribution though I will make it by the end of March.
In the early days, fighting hard to be able to invest without carrying annual platform fees was a big deal and easier to do. I only have shares and ETFs in this account, and it’s a fair amount of money. III is privately held, and that’s bad in a financial institution IMO. Large privately held companies in the Anglosphere tend to be rapacious asset-strippers doing all sorts of stuff hidden from sight.
Not all privately held companies are bad – Aldi is privately held, but your risk dealing with Aldi stops when you get out of the store, or perhaps after you’ve eaten the food. Whereas in a financial institution it can look fine, until one day it isn’t. Sunlight is the best disinfectant4, so I don’t want privately held financial institutions in my life unless there’s a really good reason.
The other part of the big picture is – am I chiseling? III’s £90 p.a. is a bit much, but Hargreaves Lansdown would charge me £45 and no more to hold this ISA.
I use HL for my SIPP, but that SIPP is run down to less than 10% of the ISA, so it doesn’t increase my exposure much. HL’s website and service is a lot smoother than iii’s, and iWeb (which is part of Halifax) has a pretty grungy website. Having said that, iWeb were reasonably quick to fix the problem when in a fit of woolgathering I transferred an ISA cash contribution to the trading account rather than the ISA. Their website is not going to upset me too much as I don’t trade often. It’s a pity that unlike TD, they don’t let you set the book cost of the shares – since the transfer happened in February I look like the world’s worst investor with red ink everywhere on valuation. I have the information on book cost from a spreadsheet, and of course I downloaded absolutely everything from iii before I quit.
If I get crap from iWeb I will consider spending the £45 for a smoother ride from HL, even if I will be enriching ardent Brexiters (to the tune of £3m donated to vote leave). That is way less than a tenth of a percent of this ISA. Perhaps RDR damaged the ISA platform industry too much for those that just carry shares, and I should be prepared to pay more 😉
If I could believe they won’t arbitrarily jack this up5 I would go that way, but their charges on funds are still a significant drag on performance up to £1m, and I will never live long enough for this ISA to get up to that sort of level. A simple statement from HL
“We have decided the treatment of shares and funds is unfair to fund holders so me are harmonising our fee structure in the interetss of transparency and equivalence”
would set me off on the run again, and HL have a £25 per line of stock transfer charge 😦
- My first S&S ISA contribution in March 2009 was only £3600 so I could only buy seven different shares at the time, though another £3600 follwed that in April. I was a pussy like 75% of people and was playing it safe with a cash ISA for the other half, which was a dreadful misallocation of capital in 2009. ↩
- Ex-UK because I have enough UK in the HYP ↩
- It’s highly unfair to blame CS or index investing alone for the lacklustre performance – CS enabled the flexibility for me to borrow a lot of my ISA back this year to bridge a house purchase, and even after that hit the CS account is still ahead. I’ve only had two years of that, whereas the HYP ISA has had nine years starting from the low-water mark of a bear market. My indexing is probably poorer than everybody else’s too – I regularly index invest only when I can’t see fear in the markets ↩
- Louis Brandeis, Other People’s Money—and How Bankers Use It (1914) ↩
- There is a cautionary tale in this post from May 2014, where I got the impression HL capped their fund charges at £200, where now they top out when you have got to £2m, where you will be paying them £4,000 p.a., or 0.2%. If I were a funds guy I’d be paying a lot more than £45 with them. ↩