Tapas this week amigos as there has been a lot going on.
First up on the platter, Interactive Investor, the UK’s second largest platform has bought Alliance Trust Savings, for the tidy sum of £40 million. Is this good news for customers?
Secondly, the King of Fund Management Showbiz, Terry Smith, has launched his new Smithson Investment Trust today which raised a record-breaking £823 million (against a target of £250 million). What’s all the excitement about?
And thirdly, politicians, personal finance hacks and almost no-one else are in frenzied excitement about Monday’s Budget. Will pensions get attacked?
Finally, if you’re finding your feet in the world of investments and losing the will to live, I recorded a podcast with The Telegraph this week (“It’s Your Money” on iTunes) aimed at helping newcomers to investing. We chat about where to go to buy your ISAs and set up investment accounts, robo advisers and who’s any good! I also unveil my most awful investment mistakes, thinking back to the tech crash of 2000. #facepalm #sausagesoftware
The combined assets of Britain’s second largest investment shop, Interactive Investor, and Alliance Trust Savings will be about £35 billion. By comparison, market leader Hargreaves Lansdown has £94 billion. Fidelity sits in third place with about £18bn.
Interactive Investor’s biggest claim to fame is that they charge a fixed fee. So for example you pay £22.50 a quarter for an ISA. And £120 a year for a pension pre-retirement. Most investment providers charge on a % basis which is typically better if you have, say, £30,000. But worse if you have about £70,000 or more. Of course for some, this is about value and service not just price – you can check out what we think about all major platforms on our Best Buys tables.
I think Alliance Trust savings customers will be better off. They will typically pay less, and they’ll join a business in rampant growth mode (!) which is investing in sorting out tech and people and taking the fight to Hargreaves. My more detailed assessment was published in Citywire on Wednesday and you can read it here.
Despite my regular "boring" sensible blurb about good investing being all about diversification and slow and steady etc. we all love the frisson of spotting the ‘next big thing’. Terry Smith runs the Fundsmith fund. He’s a bit like Wagner on the X-Factor – the public adore him but the judges have reservations. His fund appeared in the top three of Most Bought lists on 6 major investment shops for September. But he does not appear on any of their Favourite Funds lists. Price is one factor at play here – charges are 0.95% which is certainly at the top end. Analysts will argue people can get similar stuff for cheaper elsewhere. The punters ignore them and keep buying – returns have certainly been good. You can have a look at the Most Bought funds on 6 major platforms here.
Today, Smith launched his Smithson Investment Trust which buys small and mid-sized companies globally worth £500 million to £15 billion. It’s timely. Anyone can see that the US has almost single-handedly been powering growth this year. And that the massive tech stocks are starting to splutter. So this is probably a good way to diversify. On the flip side there is no track record. And it’s not actually Smith running the money – but a couple of former Goldman Sachs chaps who have joined the cast. I don’t feel a mad rush to buy – but it will be interesting to see if Smith can transfer the Midas touch.
On Monday, Philip Hammond will deliver the Budget. There are some rumblings that he might cut the annual allowance for pensions (currently you can put in up to £40,000 a year and get the freebie top-ups from the Government). If you are thinking about a chunky pension contribution this year, it may be worth accelerating your plans. Hargreaves Lansdown have a good pre-Budget analysis here, delivered by their pensions expert Tom McPhail who, despite channelling a fashionably un-pensionsy dishevelled look, knows more about retirement income planning than most.
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