Charles Stanley Direct have held the unofficial title of ‘probably the cheapest fund and shares trading platform’ for most accounts for a while, and today’s move probably thrusts that honour to AJ Bell Youinvest. (Before all the gonks shout at me, I KNOW it depends on what someone has and how often they trade, and I KNOW you can find sterile platforms built in 1970s East Germany which will do it for less, but I’m talking rules of thumb, dudes.)
Despite the increase, Charles Stanley Direct still remain broadly competitive. The average headline administration fee for largest 10 DIY fund ISA providers will shift very slightly to 0.34%. Not including the fixed £ fee brigade, who are another kettle of fish.
But hold up – there’s another school of thought around
Robin Hood is a US trading app which charges no brokerage fees, and currently only makes money from interest on cash. The venture capital guys can’t get enough of this. It’s the “get the eyeballs and monetise them later” school of thought. Last week Fidelity announced two fee-free ‘exchange traded funds’. FREE funds. This is mega news and quite brave. One of the industry’s biggest names thinks we should be able to access US blue chips and international share funds for nada.
Nonetheless, Fidelity made a record $5.3bn operating profit on revenues of $18.2bn last year. So if I were a less trusting soul, I might suggest that this is like giving away a small bowl of salty crisps, in the hope that someone will buy 6 pints of beer. But enough cynicism in one so young….
It ain’t just about price
Hargreaves Lansdown clearly remains one of the priciest options, but it has still gobbled up the lion’s share of inflows in the first 6 months of 2018. With a headline fee of 0.45%, Boring Money readers rate it a modest 3.3 out of 5 (compared to an average score of 3.8) when it comes to value for money, but nonetheless 78% of customers would recommend it to others. Whilst there will always be those who want to pay the lowest available fee, most DIY investors we talk to make a value assessment, with service and convenience being weighed up against cost. The industry focusses more on a 0.1% pricing differential than the vast majority of consumers. As someone said to me last week, “Hanging on the phone does my head in and these guys answer quickly. You can talk to a human being who can actually solve your issue. I’ll pay for that.” Quite.
My pet hate is when people are evasive about what they charge
Massive adviser firm St James's Place is notably bad at this. Fees are high. I’m not going to argue the value point here today (and many customers say they value their service), but it makes me hopping mad that they do not spell it out more clearly to new customers. One reader wrote to me this week with her query – here's what I said.
It’s my personal opinion only, before anyone gets hot under the collar.
So there you have it. Prices up. Prices slashed. And prices maintained. As for the direction of travel, 64% of CEOs and directors of DIY platforms we canvassed in June felt that prices would fall over the next 5 years. I agree. And I suspect the fund managers are first in the firing line, before advisers or investment platforms. But that’s another story for another day.