Question
I have £500K in ISA and NonISA funds administered by Hargreaves Lansdown. It seems that the higher trail commission rebate at Cavendish is worth an extra £1600 pa.
This is a high price for the "benefit" of HL research, marketing and HL TV!
I will be transferring to Cavendish Online. Cavendish state they do not charge a platform fee or switching funds.
However I thought Cavendish used Funds Network which do seem to charge platform and switching fees. I'm left wondering whether I pay anything for these if I am with Cavendish?
I also want to know if Cavendish Online will pay trail rebate on my existing funds which I reregister to them as well as any new funds?
Answer
I agree, £1,600 is a high price for the HL 'benefits' you mention, so transferring may well be a prudent move.
However, you should be aware that Hargreaves Lansdown charges £30 (inc VAT) per fund or share if you want to move them 'as is' (technically called 'in-specie') to another platform - more than any other platform that I'm aware of. It's a bitter (and arguably unfair) pill to swallow, but nevertheless the potential savings elsewhere should still justify the transfer.
You can avoid this charge by selling your funds, transferring the money as cash and repurchasing funds on the new platform (for ISA investments make sure you complete a transfer form with the new platform and let them handle it, else you could lose your ISA benefits). However, this involves your money being out of the market for at least several days - from which you may profit or lose out due to market movements. And you could end up with a capital gains tax bill on the non ISA funds if sold at a profit.
Moving onto Cavendish Online, they use the Fidelity FundsNetwork platform and rebate all initial and trail commission, so a typical 1.5% annual fund charge will fall to about 1%.
FundsNetwork is paid a platform fee from the fund charge, probably about 0.25% of the 1% in the above example. And from this FundsNetwork pays Cavendish Online 0.05%, i.e. £50 a year per £100,000 invested.
So FundsNework and Cavendish Online are making money, but it's incorporated into the fund charge. There are currently no extra charges for switching funds or if you want to move to another platform in future, i.e. what you see is what you get. And yes, you can enjoy trail commission rebates on existing funds as well as new investments.
Given the size of your portfolio, you might also want to consider Alliance Trust Savings and Interactive Investor, who usually offer lower annual fund charges than Cavendish Online and charge a fixed annual platform fee rather than a percentage (more favourable for larger portfolios). Unlike Cavendish Online they charge dealing fees for funds, but they might still prove cheaper overall.
If you haven't already please do try out my www.comparefundplatforms.com website, it will give you a much clearer idea of how costs stack up for the more competitive platforms. Unfortunately Hargreaves Lansdown refuses to send me the necessary fund charge/rebate data, so it's not possible to include them. My guess is they don't want their customers finding out they're not as cheap as they like everyone to think.
I have £500K in ISA and NonISA funds administered by Hargreaves Lansdown. It seems that the higher trail commission rebate at Cavendish is worth an extra £1600 pa.
This is a high price for the "benefit" of HL research, marketing and HL TV!
I will be transferring to Cavendish Online. Cavendish state they do not charge a platform fee or switching funds.
However I thought Cavendish used Funds Network which do seem to charge platform and switching fees. I'm left wondering whether I pay anything for these if I am with Cavendish?
I also want to know if Cavendish Online will pay trail rebate on my existing funds which I reregister to them as well as any new funds?
Answer
I agree, £1,600 is a high price for the HL 'benefits' you mention, so transferring may well be a prudent move.
However, you should be aware that Hargreaves Lansdown charges £30 (inc VAT) per fund or share if you want to move them 'as is' (technically called 'in-specie') to another platform - more than any other platform that I'm aware of. It's a bitter (and arguably unfair) pill to swallow, but nevertheless the potential savings elsewhere should still justify the transfer.
You can avoid this charge by selling your funds, transferring the money as cash and repurchasing funds on the new platform (for ISA investments make sure you complete a transfer form with the new platform and let them handle it, else you could lose your ISA benefits). However, this involves your money being out of the market for at least several days - from which you may profit or lose out due to market movements. And you could end up with a capital gains tax bill on the non ISA funds if sold at a profit.
Moving onto Cavendish Online, they use the Fidelity FundsNetwork platform and rebate all initial and trail commission, so a typical 1.5% annual fund charge will fall to about 1%.
FundsNetwork is paid a platform fee from the fund charge, probably about 0.25% of the 1% in the above example. And from this FundsNetwork pays Cavendish Online 0.05%, i.e. £50 a year per £100,000 invested.
So FundsNework and Cavendish Online are making money, but it's incorporated into the fund charge. There are currently no extra charges for switching funds or if you want to move to another platform in future, i.e. what you see is what you get. And yes, you can enjoy trail commission rebates on existing funds as well as new investments.
Given the size of your portfolio, you might also want to consider Alliance Trust Savings and Interactive Investor, who usually offer lower annual fund charges than Cavendish Online and charge a fixed annual platform fee rather than a percentage (more favourable for larger portfolios). Unlike Cavendish Online they charge dealing fees for funds, but they might still prove cheaper overall.
If you haven't already please do try out my www.comparefundplatforms.com website, it will give you a much clearer idea of how costs stack up for the more competitive platforms. Unfortunately Hargreaves Lansdown refuses to send me the necessary fund charge/rebate data, so it's not possible to include them. My guess is they don't want their customers finding out they're not as cheap as they like everyone to think.
Read this Q and A at http://www.candidmoney.com/askjustin/831/leaving-hargreaves-landown-will-slash-costs-any-catch
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