Costs and charges pages

[Yas]

I like numbers.

Now that we have that opening statement out of the way, I’m trying to make sense of some of the costs and charges pages. It should be relatively straight forward to help me understand.

Question 1:
FTSE 100 ETF LON:ISF has negative transactional costs? How does that work? Then it’s so much cheaper than buying individual shares which incur stamp duty!

Question 2:
For those shares that have stamp duty which are a cost on execution, the investment amount is £5,000, so for the £25 (for the 0.5% duty shares), is this on top of the 5,000? That isn’t explicit in the page from what I can see.
Running the numbers for the investment NOT including stamp duty, the indicative value at 5% per year will be £6,381.41 including the charges
But if the investment amount IS including stamp duty (which would be £24.88, and shares being 4,975.12) then the indicative value would be £6,349.65 including charges
Seems to mix up the inclusive and exclusive of charges calculations as you read down… Unless I’ve done some creative accounting

Also not really a question, but a thought:
The execution costs aren’t considered when looking at the percent gain/loss of shares owned, so I’m always mentally thinking to take away at least 0.5% of what I see in app.

Anyone got some insight on my question?

[finki]

You’ve stumbled in to my area - brace yourself. I’ll try and not drown you in data!

Question 1 is all about “Slippage” or “Arrival Prices”. Managers are forced to mark the theoretical price they would have got at the point in time the order was transmitted against the price they actually achieved. Give liquidity, illiquidity, market opening hours, exchange/MTF proliferation and so on… the price they end up benchmarking against can be higher or lower then what they achieved. So, if they sold £1000 at £1 x 1000 but the Slippage methodology returns a price of £1.01 at the point of “transmittal” then they will be judged against a sale price of £1010 that they “could” have achieved… so in this case, a loss. If however market movements went the other way and they sold 1000 @ £1 but at the point of transmittal the price was 99p then they’d be benchmarked against £990 … or a £10 profit… Enough of these “profits” and you can claim that your trading actually yields a negative (profitable) charge… of course the fund in question has theoretically lost money due to a poor manager/poor execution?

This is the joy that the MiFID and PRIIPs regulations place upon managers. It’s highly dubious, it’s highly unpoliced and it’s highly questionable what managers apply what methodology to calculate this transaction cost. End result : a regulation designed to level the playing field and allow retail investors to compare apples with apples has achieved no such thing… and it’s increased costs… at exactly the point in time everyone is cost conscious and the regulator is asking the industry to bring down costs.

This is better than I could ever explain…

Flow-chart-MIFID-II-calculating-transaction-costs.pdf

…and in the mean time everone is struggling with the “Costs and Charges Disclosure” rules … to the point that the end investor very rarely gets the accurate information they need to make a fair comparison pre-trade…

If you want to see a few people struggling… finki.io/video.html

I need to lay down now.

Phew!

[Yas]

It’s intriguing to see what should theoretically be done, I guess a bit of interpretation comes into play… Plus the mass of data becomes harder to manage trying to keep things up to date.

Thanks for your response! I always like to learn new things.

Do you accumulate data from all these sites and compare them? I’ve used your functions in my spreadsheets before, very helpful!

[finki]

I do. At least in part. Once you extract everybodies (FT, Charles Stanley, HL, AJBell, Fidelity, II, tickr, Dozens etc…etc…etc…) and line them up and standardise them you notice something… they’re sometimes quite different! That is to say “wrong”. It’s not just costs and charges. It’s KIID documents, factsheets, dividend yield as well as the fee based data (ongoing, transactions, performance etc…)

There is a mountain of data out there and it is difficult to manage… but it can be managed… I know, I build stuff to manage it

Glad you liked it. I have a tendency to go overkill on the info