A study conducted by market analysts Lang Cat on behalf of The Sunday Times and published this weekend shows that UK investors who make the wrong choice of stocks and shares ISA can end up paying annual fees that are a whopping 79 times higher than need be the case. Lang Cat cross-referenced charges levied by 21 of the UK’s most popular investment platforms offering stocks and shares ISAs and SIPPs. Size of investment pot, the regularity of investments being bought and sold and the products used, such as ISAs or SIPPs, all made a much more significant difference to the final charges applied to different model client profiles than might be expected from a quick glance at headline charges.
Lang Cat found that a stocks and shares ISA holder paying in £100 a month and making six trades a year would pay only £2 in fees using Charles Stanley Direct. The same client would pay £158 with Alliance Trust Savings. However, for anyone with more than £48,000 invested in their ISA, the tables would turn and using Alliance Trust Savings would prove to be cheaper.
A further example provided was for a SIPP with a value of £50,00 and no trades made in our out. It would cost just £90 to hold that SIPP with iWeb and £332 with Willis Owen. The examples demonstrate the sometimes complex structure of fees, which are split between trading transaction costs and administration costs. These also tend to vary according to the value of the portfolio and volume of trades made throughout the year. Simply looking at headline fees often doesn’t give clients an accurate picture and they have to put time and effort into adding fees up based on their actual portfolio and average or anticipated annual contributions and trade volumes.
Investment platforms also occasionally change fees and changes can mean that future charges will work out as less for some clients and more for others. For example, Interactive Investor recently acquired TD Direct. TD Direct clients have until now paid a fee of 0.3% per annum on the value of their portfolios, which will now change to a flat quarterly charge of £22.50 and lower trading costs. The flat charge will save investors with holdings of more than £20,000 and be more expensive for those with lower value portfolios.
The study’s findings were that there is no ‘cheapest option’ among the popular ISA and SIPP providers, with charges varying significantly from portfolio to portfolio, product to product and on how regularly an investor trades. The wealth management industry is being pressured into clearer fee structures that make it easier for clients to assess how much they will be paying annually. Unfortunately, until that happens careful comparison of fees that will be charged on stocks and shares ISAs and SIPPs is advisable.