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.