Hi, Iām not sure if this has been raised before, but would it be possible to have the ISA fee priced according to portfolio value and capped at Ā£3?
Iāll try to be to the point. Hereās my reasoning:
As a fledgling investor, my portfolio is very small. Lets say I invest Ā£83.33 per month, ~Ā£1000 per year. Assuming I made a 10% profit (Ā£100) I would lose 1/3 of my profit to ISA fees, massively slowing my portfolio growth.
The logical conclusion for me here would be to not start an ISA with freetrade and use your GIA until my portfolio had grown, as I think the first Ā£11000 of capital gains and Ā£2000 of dividends are not taxed on a GIA (correct me if Iām wrong).
If Iām correct, then even after I had exceeded my limit I would still be better off with a GIA for while, lining the tax manās pocket instead of freetrade.
I would rather support my broker. An ISA is much more āstickyā then a GIA, and there is a definite bonus in having my portfolio in an ISA earlier and not having to sell/ buyback my equities later.
My idea is making the
Monthly ISA fee = (portfolio size * 0.001) / 12
Or increasing the bold section to 0.01, but capping the max monthly fee at Ā£3.
This way, you would get people like me on ISAās earlier, locking in potential long time investers. The fees would gradually increase my portfolio does. Freetrade also potentially gets paid earlier. I still would technically be better off going GIA first, but the value of not having to sell/buyback makes up for this.
This is not a deal breaker for me as I will GIA first if necessary, but it be a ānice to haveā. Thanks for reading
I think you said it all.
In the end of the day itās not really a problem. Of course thereās the chance one having to pay more when buying back in the ISA, but itās also possible to end up paying less.
I guess the real hassle is to go through the whole process, specially if the investor have a portfolio with dozens of individual stocks. But given the size of the allowances, the transfer wouldnāt have to be done in one go.
I donāt really see this as being a problem. I can see the convenience you seek though. And if FT were to decide going for it I would support it. It would include complexity in the pricing structure though.
Yeah, the pricing structure is very clean, straight forward and non-scummy right now.
And Iām sure some early investors donāt mind taking such a large percentage hit early on if they are thinking very long term. So there would likely need to be an assessment there on what would provide freetrade with the best return.
I know exactly where youāre coming from, but Iām with Raul in thinking the increase in pricing complexity isnāt worth it. Being known as an easy-to-understand fixed fee platform has very high value in my opinion.
Instead Iād like to see in-app guided walkthrough to help people pick the appropriate account type for them. āHow much do you expect to have invested after a year?ā. If, say, 30% of the answer was less than the current personal CGT allowance, the app would suggest opening a GIA. Otherwise it would suggest an ISA.
Ā£10,000 pot and a Ā£30 a year isa fee is 0.30% of your portfolio. However the fee percentage will continue to drop as your portfolio grows.
I will open an ISA with 5k in April. Personally I donāt want the hassle of even thinking about capital gains or dividend tax in the future. Everyoneās circumstances are different
I donāt think thatās quite the way to think about it.
If you invested Ā£10,000 at the start of the year and then sold it at the end of the year for Ā£10,500, youād have made a 5% profit. Yay!
But your expenses were Ā£36 due to ISA fees. So actually you walk away with Ā£10,464, which is a profit of only 4.64%.
Your profits were reduced by 7.2% just because of your account type.
(But yes, I fully understand that Ā£36 may be small enough to be an acceptable cost to aid convenience when thinking about taxesā¦ though if you donāt sell anything, the self-assessment is no more difficult than normal. And even if you do, HMRC have an easy to use walk through to work out what you need to report, if anything)
If youāre getting 5% in dividends (and there are a number of companies in the FTSE100 who pay over 5%) you only need Ā£40K to hit the 2K dividend limit
I know thatās a lot for most people, but itās not an unimaginable amount
They ought to be earning a little interest on cash left in accounts. Of course, once fractional shares and DRIP is implemented, thereāll be a lot less cash laying aboutā¦
What if you need to sell your shares to cover something completely unexpected or you decide to move house and sell shares? Youād be clobbered for Capital Gains
I reckon ISAās will be popular. 0.3% ish on ~10K compares favourably with the 0.45% Hargreaves Lansdowne charge for instance, and combined with Free trades will make it cheaper for lower amounts as well
Even if you donāt have Ā£10K+ now, you might have next year, think positive
The worst case interpretation of his example would be that he purchased Ā£75k of stocks in his GIA, and then needs to sell them all. If he managed to do really well, maybe heās 15% up after the small handful of years it took to get to 75k. The gains would be less than the allowance, so nothing to pay in tax.
The most compelling case for switching to an ISA āearlyā (before youāre in danger of exceeding your CGT or dividend allowances) is just the convenience of having all your investments in one account, so wanting to be able to transfer everything: which means doing the transfer when you only have Ā£20k.
At that point youāre paying an effective fee of 0.18% with Freetrade, which is better that some other percentage platforms, but not quite as good as Vanguard at 0.15%. And of course there are cheaper fixed-fee platforms (but they donāt have free trading).
But overall Iād say that value-for-money wise, switching to an ISA when you have 20k can easily be justified for the convenience it affords.
If you intend to build up to Ā£75k over 5 years I would certainly utilise an ISA. Irrespective of CGT at that level of investment you should be churning out well over 2k of dividends / year.
:freetrade:
