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Where is the best place to buy your ISA?
There are many websites catering for ISA investors. Which are the cheapest?
by Gavin Lumsden on Mar 16, 2012 at 18:23Follow @GHLumsden
(Update) What's the cheapest place to buy a stocks and shares ISA?
Although you can buy funds for your ISA direct from fund management companies, generally speaking it's cheaper and you get far more choice if you go to one of the many investment 'supermarkets' and discount brokers that have emerged in recent years.
However, comparing the costs of these websites is difficult as they charge a range of upfront, monthly and annual fees with additional one-off administration charges on top.
Fortunately, a new website called Investor Bee has come up with some answers. Drawing on a database of the fund holdings of 1.2 million private investors Investor Bee has devised what it says are objective definitions of risk: high, medium, medium-low etc.
All that is interesting but is the topic for another article. What interests me is the following table, which shows how much of your money would go in charges each year using eight of the biggest fund supermarkets.
The table shows the costs for investors with different risk levels. We've ranked the table on the medium-low risk category as we think that is where most people lie, and it fits in with the five ISAs for novice investors we highlighted last week.
Total annual charges on the main fund supermarkets
|Alliance Trust Savings||1.08%||0.97%||0.90%||0.87%|
|TD Direct Investing (formerly TD Waterhouse)||1.32%||1.11%||0.94%||0.88%|
|The Share Centre||1.86%||1.64%||1.47%||1.41%|
Source: Investor Bee
Currently, it looks like medium-low risk investors are paying more than high-risk investors, which seems a bit unfair! Investor Bee's analysis assumes that the full £10,680 ISA allowance has been invested. More significantly, it also assumes that investors are choosing lower cost tracker funds rather than more expensive active funds.
This puts Hargreaves Lansdown, the market leader, in a poor light as it recently introduced monthly charges on tracker funds sold on its platform. The analysis also includes any special end-of-tax-year offers.
For another way of looking at this, the Candid Money website has analysed the savings you can get from different websites. Traditionally, discount brokers, as they are also called, made their money from the annual commision they received from fund management groups. As competition has intensified, the discount brokers have started to share some of these rebates with investors. This list includes several websites not covered in the first table. Unlike the Investor Bee analysis, Candid Money has taken eight diverse funds, all but one of which is actively run.
Discount broker savings
|£10,860 ISA invested|
|Equivalent annual rebate||Saving|
|Alliance Trust Savings||0.26%||£447|
Source: Candid Money
As Justin Modray of Candid Money points out, some of the cheapest discount brokers offer a 'no-frills' service without any research tools or help. However, if you know which funds you want, they can provide an efficient and cheap way of investing.
Fund supermarket charges can be confusing. We'll do some more comparisons in future, but for the time being these two tables should point you in the right direction.
More about this:
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What others are saying
- InvestorBee website
- Alliance Trust website
- Selftrade website
- Hargreaves Lansdown
- Fidelity FundsNetwork
- TD Direct Investing
- Bestinvest website
- The Share Centre
- Barclays Stockbrokers
- Cavendish Online
- Candid Money
- Massow's (Paymemy.com)
- Chartwell Direct
- TQ Invest
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by Gavin Lumsden on May 22, 2013 at 11:42