Skip to main content

Cheap platforms for buy-and-hold investment trust investors

12 October 2017

Investment trust investors can drive down their annual platform costs to just 0.1% - a ‘steal’ according to one expert - by restricting themselves to just four trades a year.

New research into the charges of online stock brokers and fund supermarkets has revealed how cost-effective investment trusts can be for private investors, particularly for those with larger portfolios and who trade infrequently.

Analysis by the Lang Cat consultancy showed that of 24 platforms offering investment trusts, 17 - or nearly two thirds - levied annual charges of 0.1% or less for investment trust ISA portfolios over £250,000 where just four transactions were made each year (see entries in bold in table below).

For the biggest investors with investment trust portfolios of £1 million and above, annual charges fell to near zero (0.01% or below) at 12, or half, of the providers surveyed.

The study, commissioned by the Association of Investment Companies, underlines how platform costs inevitably take a bigger bite out of smaller portfolios. However, even at the £100,000 level 11 of the 24 platforms charged 0.1% a year or less. This is remarkable given that the major platforms typically charge 0.25%-0.45% a year on mainstream open-ended investment companies (Oeics) and unit trusts.

The list of low-cost providers includes AJ Bell Youinvest, Fidelity Personal Investing, Hargreaves Lansdown and Interactive Investor alongside smaller rivals such as Clubfinance, IG, iWeb and SVS XO.

Barclays, which has outraged many of its customers with a botched website upgrade, emerges as a fair value provider with costs rating between 1.44% and 0.1% on savings between £5,000 and £1 million. However, its figures were compiled before last month’s tariff change and will be different from those in our table.

Of the bigger players Bestinvest looks expensive with annual costs of 0.46% at the £50,000 level, falling to 0.25% for £1 million pots. However, at the other end of the scale, it is one of nine providers offering a relatively good deal for beginner investors by taking 1% or less on savers with £5,000 in investment trusts.

The findings demonstrate two things: firstly, the advantage of a buy-and-hold investment strategy for keeping down costs and avoiding frittering away returns through excessive trading. This is important as, unlike open-ended funds and unit trusts which are free to trade on most platforms, investment trusts incur transaction charges of £5 to £12.50, although half of the providers cut these to £1 and £2 per trade for regular investors.

Secondly, the impact of charge caps, which investment trust investors benefit more from than investors in rival open-ended funds and unit trusts. 

‘Hargreaves Lansdown is the most obvious example with it being the biggest provider. Platform charges max out at £45 for an ISA if you invest outside of funds and are not at all for a general investment account (GIA),’ commented Steve Nelson, platform pricing expert at The Lang Cat.

Referring to some of the ultra-low cost percentages in Lang Cat’s table, he added: ‘The reason that our example looks like a steal for larger portfolios is that we assume a moderate level of trading so a £40 or £50 charge compared to a £1 million holding is virtually nothing.’

In addition to highlighting the potential good value in investment trusts, the research shows the savings that can be made by switching platforms, although transfers between providers can be slow and expensive as some will charge departing customers.

Annabel Brodie-Smith of the Association of Investment Companies said: ‘We have launched this research with Lang Cat to help investors compare costs and make an informed decision. However, when choosing a platform, there are many other factors to consider besides costs, such as the level of service, which investments can be held, and whether the platform offers the features and functions that you need.’

Platform charges are split into ongoing costs, also known as administration or custody costs, which are charged no matter how much you trade. On top of these are the transaction costs of buying and selling investment company shares.

These costs vary dramatically, with six platforms having no ongoing costs for holding investment trusts, seven platforms have fixed fees varying from £20 to £120, and the rest charged based on a percentage of assets – which in some cases is capped at a certain level. 

Details of each platform’s charges are listed separately below the table.

Note: increasing the number of transactions a year will result in far higher charges as we discovered in our study of platform fees in the Investment Trust Insider ezine three years ago.  

The platform costs in the table do not include the ongoing charges levied by investment trusts.

Platform costs of investment trust ISA portfolios

 

  £5,000 £15,000 £25,000 £50,000 £100,000 £250,000 £500,000 £1 million
AJ Bell  1.05% 0.47% 0.28% 0.14% 0.07% 0.03% 0.01% 0.01%
Alliance Trust 2.40% 0.80% 0.48% 0.24% 0.12% 0.05% 0.02% 0.01%
Barclays 1.44% 0.48% 0.29% 0.15% 0.12% 0.11% 0.10% 0.10%
Bestinvest 1% 0.60% 0.52% 0.46% 0.43% 0.41% 0.31% 0.25%
Charles Stanley 1.40% 0.56% 0.43% 0.34% 0.29% 0.11% 0.06% 0.03%
Close Brothers 0.97% 0.49% 0.39% 0.32% 0.29% 0.26% 0.26% 0.25%
Clubfinance 1.60% 0.53% 0.32% 0.16% 0.08% 0.03% 0.02% 0.01%
Equiniti Shareview 1.50% 0.83% 0.56% 0.28% 0.14% 0.06% 0.03% 0.01%
Fidelity  0.94% 0.34% 0.22% 0.13% 0.09% 0.06% 0.05% 0.04%
Halifax  1.25% 0.42% 0.55% 0.45% 0.40% 0.22% 0.21% 0.21%
Hargreaves Lansdown 1.41% 0.62% 0.37% 0.19% 0.09% 0.04% 0.02% 0.01%
iDealing 1.19% 0.40% 0.24% 0.12% 0.06% 0.02% 0.01% 0.01%
IG 0.64% 0.21% 0.13% 0.06% 0.03% 0.01% 0.01% 0.00%
Interactive Investor 1.60% 0.53% 0.32% 0.16% 0.08% 0.03% 0.02% 0.01%
iWeb 0.90% 0.30% 0.18% 0.09% 0.05% 0.02% 0.01% 0.00%
Saga  1.36% 0.72% 0.59% 0.50% 0.45% 0.42% 0.31% 0.25%
Selftrade 0.87% 0.29% 0.17% 0.09% 0.04% 0.02% 0.01% 0.00%
Sharedeal 0.76% 0.25% 0.15% 0.08% 0.04% 0.02% 0.01% 0.00%
Strawberry 1.56% 0.67% 0.54% 0.45% 0.35% 0.29% 0.27% 0.26%
SVS XO 0.64% 0.21% 0.13% 0.06% 0.03% 0.01% 0.01% 0.00%
Telegraph 1.20% 0.57% 0.46% 0.38% 0.34% 0.14% 0.07% 0.03%
TD Direct 1.72% 0.33% 0.20% 0.10% 0.05% 0.02% 0.01% 0.01%
Share Centre (standard) 1.75% 0.78% 0.63% 0.52% 0.46% 0.42% 0.41% 0.41%
Share Centre (frequent) 3.67% 1.22% 0.73% 0.37% 0.18% 0.07% 0.04% 0.02%
Trustnet 1.20% 0.52% 0.41% 0.33% 0.24% 0.10% 0.05% 0.02%
Willis Owen 1.00% 0.60% 0.52% 0.46% 0.38% 0.27% 0.21% 0.18%
X-O 0.48% 0.16% 0.10% 0.05% 0.02% 0.01% 0.00% 0.00%

Source: The Lang Cat. Based on platform charges on investments in investment trusts held in an ISA account and making four trades (buy or sell) a year.

 

Platform charges

GIA = general investment account
ISA = individual savings account
Sipp = self-invested personal pension

AJ Bell Youinvest

Core charges: 0.25% platform charge for non-fund investment, capped at £30 for GIA/ISA and £100 for pension
Pension: no additional charge
Investment company transactions: £9.95 a deal, reducing to £4.95 if there are 10 or more deals in the previous month
Regular investing charge: £1.50
Automatic dividend reinvestment fee: 1% with a minimum of £1.50 and a maximum of £9.95

Alliance Trust Savings

Core charges: £10 per month with four free trades bundled in. Applies to each wrapper if you have an ISA and a dealing account
Pension: £17.50 + VAT per month, with four free trades bundled in
Investment company transactions: £9.99 a transaction
Regular investing charge: £1.50
Automatic dividend reinvestment fee: £5

Barclays

Core charges: 0.1% platform charge, minimum of £48 and maximum of £1,500 per annum
Pension: £150 annual fee
Investment company transactions: £6
Regular investing charge: £1
Automatic dividend reinvestment fee: 1%, minimum of £1 and maximum of £7.50

Bestinvest

Core charges: 0.4% up to £250,000, 0.2% between £250,000 and £1 million, 0% above £1 million
Pension: As above except 0.3% for the first £250,000
Investment company transactions: £7.50
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Charles Stanley Direct

Core charges: 0.25% for investment company investment, minimum of £24 and a maximum of £240 a year – waived if you trade in the month
Pension: £120 annual fee, which is waved if you hold a total portfolio across all wrappers of £30,000 or more
Investment company transactions: £11.50
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Close Brothers Self-Directed Service

Core charges: 0.25% a year
Pension: No additional charge
Investment company transactions: £8.95
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Clubfinance

Core charges: no fee if you trade three times a quarter, otherwise £15 per quarter
Pension: N/A
Investment company transactions: £4.95
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Equiniti Shareview

Core charges: 0.5% a year with a £24 minimum and £90 maximum
Pension: N/A
Investment company transactions: £12.50
Regular investing charge: £1.75
Automatic dividend reinvestment fee: £1.75 on selected equities

Fidelity Personal Investing

Core charges: £45 a year up to £7,500, over this amount 0.35% a year capped at £45
Pension: No additional charge
Investment company transactions: 0.1% deal charge with the service fee for investment companies capped at £45
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Halifax Share Dealing

Core charges: £12.50 per year for the ISA.
Pension: £90 a year up to £50,000 and above this, £180 a year
Investment company transactions: £12.50
Regular investing charge: £2.00
Automatic dividend reinvestment fee: 2% to a maximum of £12.50

Hargreaves Lansdown

Core charges: 0.45% a year for investment companies capped at £45 for ISA and £200 for Sipp
Pension: No additional charge
Investment company transactions: £11.95 per trade, reducing to £8.95 if there are 10-19 trades in the previous month, and reduced further to £5.95 if there are more than 20 trades
Regular investing charge: £1.50
Automatic dividend reinvestment fee: 1% with a £1 minimum and £10 maximum

iDealing

Core charges: £20 a year administration charge per account
Pension: £20 a year administration fee
Investment company transactions: £9.90
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

IG

Core charges: £0
Pension: £195 annual fee
Investment company transactions: £8 per trade reducing to £5 if 10-plus trades were placed in the previous month
Regular investing charge: No discount  
Automatic dividend reinvestment fee: N/A

Interactive Investor

Core charges: quarterly £20 account fee, comes with credit for two free trades each quarter
Pension: £96 annual fee
Investment company transactions: N/A
Regular investing charge: £1.50 for funds and equities
Automatic dividend reinvestment fee: 1% with a maximum of £10

iWeb

Core charges: £25 one-off account opening fee for ISA and GIA
Pension: £90 a year up to £50,000 and £180 a year above this amount
Investment company transactions: £5
Regular investing charge: No discount
Automatic dividend reinvestment fee: 2% with a maximum of £5

Saga Investment Services

Core charges: 0.4% up to £250,000, 0.2% between £250,000 and £1 million, 0% above £1 million
Pension: as above except 0.3% for the first £250,000
Investment company transactions: £11.95
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Selftrade

Core charges: £0
Pension: £118.80 a year
Investment company transactions: £11.75 reducing to £6 if 20 trades are placed in the previous month across all accounts
Regular investing charge: £1.50
Automatic dividend reinvestment fee: £1.50

ShareDeal

Core charges: £0
Pension: £118.80 a year, although reduced if an active share dealing account is linked to the pension
Investment company transactions: £9.50
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Strawberry

Core charges: 0.35% up to £50,000, 0.25% between £50,000 and £1 million, 0.1% above £1 million. Minimum charge of £30 a year and an annual platform charge of £10 a year
Pension: £120 a year
Investment company transactions: £9.50
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

SVS XO

Core charges: £0
Pension: N/A
Investment company transactions: £7.95
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Telegraph Investor

Core charges: 0.3% with a minimum of £20 a year and maximum of £300 a year
Pension: £96 a year, however there is still a £300 cap so the Sipp fee effectively reduces the cap to £204
Investment company transactions: £10
Regular investing charge: No discount
Automatic dividend reinvestment fee: 1% to a maximum of £10

TD Direct

Core charges: ISA charged at £30 plus VAT a year but waived if you have a portfolio of less than £5,100, or you have regular investing set up. Dealing account is charged at £20 plus VAT twice a year, waived if you placed one or more trade in the previous six months, have a portfolio of less than £10,000, or have a linked Sipp or ISA
Pension: 0.25% taken twice a year, with a minimum of £96 and a maximum of £240
Investment company transactions: £12.50 a trade reducing to £8.95 if there were 10-19 trades in the previous three months, reducing to £5.95 if there were more than 20 trades
Regular investing charge: £1.50
Automatic dividend reinvestment fee: £1.50

The Share Centre

Core charges: £57.60 annual charge for ISA, £21.60 annual charge for GIA
Pension: £172.80 a year
Investment company transactions: £7.50 for deals under £750, or 1% above £750 as the standard option, or a frequent dealing option of a flat rate of £7.50 a trade plus a £96 a year admin fee
Regular investing charge: 0.5% with a minimum of £1
Automatic dividend reinvestment fee: 0.5%

Trustnet Direct

Core charges: 0.25% a year with a £20 minimum and £200 maximum
Pension: £96 a year
Investment company transactions: £10 per buy/sell, reducing to £6 for the rest of the month if you’ve paid for 10 full price trades that month
Regular investing charge: £2
Automatic dividend reinvestment fee: 1% to a maximum of £10

Willis Owen

Core charges: 0.4% up to £50,000, 0.3% between £50,000 and £100,000, 0.2% between £100,000 and £250,000, and 0.15% above £250,000
Pension: £132 annual fee
Investment company transactions: £7.50
Regular investing charge: £1.50
Automatic dividend reinvestment fee: £1.5- per reinvestment to a maximum of £15 a year

XO

Core charges: £0
Pension: £118.80 a year that is refunded if you invest your Sipp in the XO dealing account
Investment company transactions: £5.95
Regular investing charge: No discount
Automatic dividend reinvestment fee: N/A

Source: The Lang Cat / Association of Investment Companies 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment company news brought to you by Citywire Financial Publishers Limited.

Announcements

View the latest investment company announcements or search the 12 month archive.

View announcements

Bringing VCT investment to life

See how VCT investment has helped dynamic businesses in the UK grow.
 

View company stories

Sign up for AIC email updates

Receive regular updates on the latest investment news and events.

Subscribe now