HL have a management fee as well, I think itâs 0.45%
So more that about ÂŁ8K and youâd be paying more than freetrade just to hold shares in it
1 Like
As Dave pointed out, youâre paying HL a platform fee of 0.45%. If you havenât noticed, you either havenât been with them longer than a year, you have cash sitting in the account and theyâre taking it and you didnât notice, or youâve configured it so they automatically sell your shares to cover the fees and you didnât notice.
If you stay with HL and are in the latter situation, itâs worth switching to paying the fee from cash. Platforms typically let you choose to pay ISA fees from your general account, for example, which can just hold cash.
Or straight from your bank account!
Just recently transferred before I knew about freetrade
Obviously hadnât looked into it enough, so will be transferring to FT when possible 
If youâve just got shares in your HL ISA ( including ETFs ) then the HL fees are capped at ÂŁ45.
I know HL get a bad rap but I think thatâs a reasonable charge.
1 Like
Itâs not bad, but I could save that 9 pounds and invest more money more frequently at less cost.
At the moment FT doesnât have the stocks i own but when they do, it makes sense to me to transfer.
1 Like
Hey ho all,
Great thread full of good, meaty debate.
Thereâs nothing I like more than a debate over personal financial strategy, so I thought itâd be good to post some reflections on the ISA.
I and the rest of the Freetrade team think the ISA is an amazing invention. Itâs unique to the UK to have such a simple, generous, tax-efficient investment account. Many countries donât have a direct equivalent.
So what does an ISA do?
It protects your investment capital growth (the increase) from capital gains tax and your dividends from income tax. It also lets you off the admin burden of reporting your gains.
You can put up to ÂŁ20k into an ISA(s) each year. If you donât make use of all of a yearâs allowance, what you didnât use doesnât roll over - itâs gone. But each tax year you get a shiny new ÂŁ20k allowance to add to whatâs already there.
Personally I think itâs legit to start using an ISA from the outset even with a relatively small portfolio, for a few reasons:
- Avoid the mental burden of having to switch later
- Avoid the hassle and potential downfalls of the transition later down the line (more on these below)
- Certainty of knowing whatever your portfolio does and whatever your general finances do, your investments are safely tax wrapped in the ISA. For instance, if you invest in a great performer and your portfolio goes up faster than you were planning or you inherit some money
Youâre correct that if your only aim is to minimise cost as much as possible AND youâre up for carefully managing when you start using the ISA, you could follow a strategy of starting off your portfolio in a Basic Account and transitioning it when you get closer to hitting the various tax thresholds.
You would want to sell off before your growth goes past the capital gains allowance (ÂŁ12k right now) to avoid paying tax. Youâd also need to have less than ÂŁ20k total portfolio size to move it over to an ISA in a single stroke.
That would let you off the fee for the ISA, until youâre sure you need it.
There are also a few potential downsides with this approach:
- If you sell positions in a Basic Account and then re-buy in an ISA, you will pay market spreads and potentially stamp duty twice
- Unexpected gains from good investments which exceed your CGT limit before you can switch them to the ISA
- If you want to put in more than ÂŁ20k when you decide to switch to an ISA (e.g. you receive unexpected amounts of money from a promotion or inheritance etc), you wonât be able to. Remember: you canât reclaim unused allowance from previous tax years.
- Unexpected capital gains (e.g. selling a rental property, art etc.) could increase your total yearly capital gain when you want to sell your investments
- Government tax policy can always change
Our view is that ISAs are a great thing and worth investing in early. But if youâre sure you can outmanoeuvre those scenarios and are up for the micromanagement, go for it! I applaud your attentiveness.
Personally, it wouldnât be my strategy, because you just never know whatâs going to happen with your finances and your investments. Certainty is a very powerful commodity in life, so the certainty of the ISA is a very valuable thing.
A final word on why we charge a flat fee for the ISA, rather than a percentage of the account. We think itâs much, much fairer because it reflects our actual cost of administration which incurs on a per account basis, not on the value of the account.
In other words, it costs about the same for us to administer a ÂŁ10,000 ISA as a ÂŁ1000 ISA.
When providers charge a percentage-of-account fee, theyâre basically assuming that the low fee on small accounts is more than made up by much, much higher fees later on when the ISA value accumulates.
We donât want to do that and penalise success - we want to incentivise long-term investing that builds towards real life goals. And in most cases, the ISA is a very effective tool for that.
As always, of course, this is not financial advice and everyone should do what best suits themselves and their circumstances.
15 Likes
Maybe look at iWeb if you have a lot invested. Otherwise Cavendish
Unless youâre close to paying CGT then the 2 are no different. For all you know the government might announce plans to restrict ISA access to make it similar to a pension
The S&S ISA here will be ÂŁ36/year.
With iWeb I paid a ÂŁ25 setup fee and only 1 ÂŁ5 trade since I did the free switch. They have no annual fees; only fees if I buy or sell which I havenât since the 1.
Not competitive for infrequent traders vs iWeb or Cavendish
I donât think the flat fee actually reflects this aim. Youâre making a choice, and that is to penalise those with little to invest.
You point out that life is easier if you just start with an ISA, and certainly that is true. But why make people with the least money pay the most percentage-wise for that convenience? Doesnât seem very fair.
The ideal would be a low percentage-based fee, capped at ÂŁ3/month. That way no one is penalised.
Now, you may have a legitimate reason for it being ÂŁ3, since, as you claim, this is the actual cost of running the account. Fair enough.
But at the same time your strategy is to give things away to get customers: no ISA fee for now, free stocks for referrals. Why not âgive awayâ cheaper ISAs as well, to aquire those customers who are starting small now, but will become those long term investors that will eventually be paying the ÂŁ3?
4 Likes
Price is a significant factor as several have discussed in this thread and others, but itâs not the only factor. Iâm an infrequently-trading iWeb customer who yearns to switch, even though I know iWeb is cheap.
2 Likes
What other factors are important to you that iWeb canât / donât offer? Genuinely interested.
1 Like
I mean: clearly I am fairly price sensitive since the major reason to be an iWeb customer is price. But the user experience and the customer support is poor, particularly compared to some new entrants like FT.
(To calibrate âpoor user experienceâ, iWeb is hard to use but not actually dark like Trading212. I donât remember if iWeb also does this but another platform Iâd consider leaving - ii.co.uk - updates cash balances very slowly after you make an international trade, which can mislead the customer etc.)
2 Likes
Agreed - I still use Halifax ( from the same stable ) and their UX is terrible. Simple tasks such as extracting dividend details to spreadsheets are tortuous.
My experience with iWeb is one of slow, expensive (compared to Freetrade), old school âcustomer serviceâ and lots of paper forms that needs to be filled in. The polar opposite to that of Freetrade. Once FT has more stocks/ETFs to offer then I see no use for iWeb what so ever. Freetrade is the future.
3 Likes
I want to open FT ISA but Iâll wait till the âdo it allâ investment platform arrives. At the moment donât have stocks I want to invest in. I only look to use FT GIA for UK stocks and FT ISA.
I have iweb ISA and donât like to pay ÂŁ5 per trade and 1.5% for FX. I opened account when there was no fee to open.
Although they are cheaper, there is lot of resistance for doing anything.
2 Likes
Also iWeb⊠who on earth came up with this name? Couldnât sound more corporate board room trying to be trendy if it tried. These guys have no idea what they are now up against.
Iâm an infrequently-trading iWeb customer who yearns to switch
If youâre infrequently-trading then things like a pretty UI (which isnât important anyway; itâs the equivalent of choosing to rent a room because it has âlive laugh loveâ on the wall) and customer service arenât important. Also their Twitter replies multiple times per day which is good enough response rates for most
1 Like
Not relevant for S&S ISAs