Interactive Investors unveils monthly fee model while Hargreaves Lansdown announces new global fund

Interactive Investors unveils monthly fee model while Hargreaves Lansdown announces new global fund

The Isa season officially ended with the tax year but the UK's biggest DIY investment platforms have upped the ante in their bid to win investors'

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The Isa season officially ended with the tax year but the UK’s biggest DIY investment platforms have upped the ante in their bid to win investors’ funds by unveiling new propositions.  

Interactive Investor has announced the introduction of three subscription plans involving a monthly fee to replace its existing quarterly charging structure from 1 June.

Customers of Alliance Trust Savings, which ii acquired last year, will also be moving onto the broker’s new pricing model.  

Hargreaves Lansdown and Interactive Investor have upped the ante in their bid to win investors' funds in the ever competitive DIY investment platforms marketplace

Hargreaves Lansdown and Interactive Investor have upped the ante in their bid to win investors’ funds in the ever competitive DIY investment platforms marketplace

Meanwhile, Hargreaves Lansdown, Britain’s biggest DIY online broker with £85.9billion assets under administration, has unveiled a global equity fund, to sit alongside its existing UK growth and UK income funds under the ‘HL Select’ banner. 

Interactive Investor introduces new monthly fee model

At present, ii customers pay £22.50 per quarter, adding up to £90 per year, but you can get that back in free trades. Standard charges are £10 to buy or sell funds, shares, investment trusts or ETFs, or £1 for regular monthly investing.

ii says the idea behind the new pricing structure is to allow customers to choose a more tailored approach that suits their needs.   

The first option, dubbed the ‘Investor’ plan, levies a monthly subscription charge of £9.99 on top of £7.99 per trade for UK shares, ETF, investment funds and trusts, with one free trade per month. 

The second option, the ‘Funds Fan’ plan, will cost £13.99 per month but boasts a reduced trading fee of £3.99 plus two free fund or investment trust trades a month. 

Interactive Investor says it took inspiration from entertainment streaming services like Netflix, in launching the new fee model

Interactive Investor says it took inspiration from entertainment streaming services like Netflix, in launching the new fee model

The third and final option, the ‘Super Investor’ plan, costs £19.99 per month and also charges £3.99 for UK share, ETF, fund and trust trades. Its bumper subscription price is down to the discounted cost to trade US shares of £4.99 in contrast to £7.99 for the other platforms. 

What’s more, other international shares also cost £9.99 – £10 less than the price levied in the other two plans.

Will it cost investors more?

Well that depends on your investment habits.

The new pricing model means you’d get better value in the long term but not everyone will feel immediately better off, according to Moira O’Neill, ii’s head of personal finance.

‘This is because the flat fee has increased, while trading fees have been cut across the board,’ she says.

‘So, it is investors who most actively engage with and manage their investments who will benefit the most. While the monthly fee effectively goes up by £2.50 in the Investor package, the trades cost goes down by £2.’

If you were the type of investor who didn’t make any trades outside your allotted credits under the current pricing regime, you’ll be paying £30 more a year on the ‘Investor’ plan.

But if you’d traded once a month, you’d be paying exactly the same as before while an investor trading twice a month would save £24 a year. 

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According to financial services consultancy firm the lang cat, the flat-fee model is the most cost effective for those with pots over £50,000 (as opposed to uncapped percentage-based charges).

Steve Nelson, consulting director at the lang cat, says: ‘Of course, this is simply basic arithmetic in action and it will depend on individual circumstances such as trading levels, contributions and investment types but such savings can add up to thousands of pounds over a medium to long term investment.’  

Hargreaves adds global equity to its fund range 

The HL Select Global Growth Shares scours the world’s major stock markets for the best investment opportunities for the long term.

It will be managed by the same team as the other ‘HL Select’ funds, led by Steve Clayton, the stockbroker’s head of equity research.

The portfolio, which launches on 3 May at £1 fixed launch price, primarily targets capital growth over the longer term. However, the investment team expects the fund to pay a dividend – although no income goals have been set.   

It will typically consist of 30 to 40 names, sit in the Investment Association’s Global sector and be benchmarked against the FTSE All-World index – but will not consider the make-up of the index when it comes to portfolio construction.     

The HL Select Global Growth Shares fund will have an ongoing charge of 0.6 per cent and is exclusive to the platform that levies admin charges of 0.45 per cent each year.

You’d need to put £100 upfront or £25 per month to invest in the fund.

Clayton says, ‘Investing globally opens up new opportunities to find truly exceptional companies from a much bigger pool of choice. We try to identify great businesses, wherever they are in the world, with strong balance sheets, and own them for the long term.

‘We look for businesses that are in charge of their own destiny, which will grow through thick and thin, regardless of issues like Brexit.

‘By taking a wary attitude to debt, we hope to shield investors from the worst of any future downturns, while capitalising on the upswings.’  

The AIC launches suite of tools for income seeking investors 

Another notable development is the launch of a suite of tools and resources to help those who invest for income track and analyse dividend-paying investment trusts by the Association of Investment Companies.

The service, dubbed Income Finder, allows investors to create a virtual portfolio of income-paying investment companies, track the dividend dates and see how much income they could receive over a year. 

Ian Sayers, chief executive of the AIC says: ‘Last year, there were a record number of visitors to our website and we hope Income Finder will be a useful tool to help inform investors’ choices.’

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