After Charles Stanley Direct's fee increase, could I do better elsewhere?
06 July 2018
Question by Gerry
Following the announcement of the platform increase at Charles Stanley Direct I think this is an ideal time to review my finances. My ISA started out with 100% in St James's Place, but following new investments and transfers over the last 3 years, I currently have about two thirds of my ISA in funds with Charles Stanley Direct and about one third left with St James's Place. Having outperformed the St James's Place funds with my own choices, I was planning on transferring the remaining one third to Charles Stanley Direct. However the recent announcement in platform price increases at Charles Stanley Direct is making me have a serious re-think. Having less than 250K invested, it seems to put me in the worst position possible, with the 40% increase in platform fees. I also have a private pension that I transferred to St James's Place, and I contribute a small amount into it monthly. Would I be correct in thinking the fees are also high on this, and I could do better elsewhere? Can I transfer into an SIPP for example? I'd be very interested to hear your thoughts.
Answered by Holly Mackay
It’s hard to comment without seeing the specifics but here’s a general opinion.
We should take a long-term view of performance, as short-term tests have even shown that my cat Mog could outperform over a year, just by sitting on the logos of the shares she likes! This year for example if people have backed Amazon, Apple and Facebook, they will have done super well – but at some point this will crumble a bit and some lesser-known firms which have been unloved will come back – and so the cycle will turn. So be careful about judging performance on anything less than 5 years, although I know we all do it. Pre tech crash I was the best fund manager in Australia (in my opinion)! During the crash, I realised that I had been youthfully arrogant, and in fact one of the worst!
That said, if you are picking a good mix of funds from around the world and you’re doing OK, then the lower fees you get as a DIY investor can make your long-term returns higher. I am generally negative about St James's Place because they're not clear enough on what they charge, and they can charge very high initial fees or high exit fees. BUT a good adviser will do more than simply pick funds for you, so it depends on your views about the overall service you are getting.
As for Charles Stanley Direct, well yes it’s a 40% hike BUT it’s still a reasonable 0.35%, which is slap bang on the industry average. So they are not taking the mickey here.
I see no reason really why you would not continue with the planned move of the rest of your ISA to Charles Stanley Direct. You could shop around to try and find somewhere for 0.25%, but it sounds as though you have had a lot of change and admin already. I’d pull the ISA into one place, breathe for a year, then you can always move if the service isn’t up to scratch?
Your pension is trickier. I believe – and do check – that St James's Place charge exit fees on pensions which start at about 6% a year, which I hate. This reduces by 1% a year. If so, there’s not much point in moving it today. But there’s no rule to say you can’t set up a SIPP elsewhere and chip into that monthly.
I would on balance leave the St James's Place pension in place until such time as there will be no exit fees – check how long this will be. In the interim, you can set up a SIPP online. You may as well do that at Charles Stanley Direct for convenience. As long as you have more than £30k on their platform, you won't pay the fixed fee for a SIPP - just the ongoing 0.35%, which is OK.
Again with a DIY SIPP make sure you spread investments around geographically. Have some global funds, not just UK stuff. Look at the Best Buy fund lists on Charles Stanley Direct and others such as Hargreaves Lansdown. If you’re unsure a ‘passive’ multi-asset fund such as the Vanguard LifeStrategy range is cheap as chips, will do all the picking and mixing for you, and is a simple and easy way to set and forget.
Hope that’s helpful.