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How to buy a cheap DIY Isa in 2016

We round up the best brokers and platforms for investing in funds, stocks and shares through an Isa
March 3, 2016

If you want to be in control of the shares and funds you invest in via your individual savings account (Isa), a DIY investment platform is the best option.

However the range of charges and costs associated with using discount brokers can seem baffling. Costs vary depending on how frequently you trade, the kind of investments you want to hold and the size of your portfolio. The way platforms charge their fees also differs wildly.

The key impacts on your Isa costs are:

■ The size of your portfolio.

■ How frequently you trade.

■ Whether you hold stocks and shares, open-ended funds, or a mix of these.

 

One of the key issues when it comes to cost will be the amount you hold. Platforms are divided between those that charge a percentage of the sum you hold in annual charges, examples being Hargreaves Lansdown and Tilney Bestinvest, and those that charge a flat fee.

In many cases, flat fees will benefit larger pots, while percentage-based fees will benefit smaller ones. For example, Hargreaves Lansdown's percentage charge of 0.45 per cent on fund holdings up to £250,000 and 0.25 per cent over that means that a portfolio of £260,000 in funds would cost £1,150 in annual fees. By contrast, Halifax Share Dealing's flat fee of just £12.50 per year is a tiny sum in comparison to the amount held. It is important to consider the depth of resource available to you with a platform like Hargreaves, which offers a large amount of research and a good user interface.

But on cost alone, when it comes to smaller pots of funds, Halifax Share Dealing, The Share Centre and AJ Bell come out with the lowest annual fees. The Share Centre charges a single flat fee of £48 and AJ Bell charges 0.2 per cent on funds, capped at £200.

AJ Bell is also the best for stocks and shares, along with TD Direct. Neither charge an annual fee to hold stocks and shares, including exchange-traded funds (ETFs) and, in the case of AJ Bell, investment trusts. Hargreaves Lansdown is also far more competitive when it comes to holdings of stocks and shares, capping charges at £45 per year, while Barclays Stockbrokers charges a flat £30 fee for stocks and shares, but a 0.35 per cent fee on fund holdings.

iWeb doesn't have annual fees but charges a set-up fee of £200, meaning after the first year it is one of the most compelling on costs for all portfolio sizes.

 

The lowest annual charges for larger pots (funds and shares)

When it comes to pots worth more than £260,000, AJ Bell and TD Direct remain the most appealing for shares, while Halifax remains the cheapest for fund holdings. Hargreaves, Barclays and The Share Centre are also good choices for shares, while Alliance Trust Savings' flat fee of £75 looks good too.

The most expensive services for £260,000-worth of funds and stocks are Tilney Bestinvest and Hargreaves Lansdown. Like Hargreaves, Tilney charges a tiered percentage fee starting at 0.4 per cent, which drops down to 0.2 per cent for any amount over £250,000. However it is important to remember that buying investments through these platforms will give you good discounts on a wide range of funds, including no initial charge.

Apart from the issue of funds and stocks and shares being charged differently, several platforms will not allow you to hold both on the same platform. Fidelity Personal Investing and AXA Self Investor do not currently offer share dealing, with Fidelity offers it only through its ShareNetwork, run by Charles Stanley. Fidelity is currently developing its own share dealing service.

 

Annual charges for Isas

Annual charges for a funds-only Isa Annual charges for a stocks-only Isa
Portfolio size£20k£50k£100k£260k£20k£50k£100k£260k
Alliance Trust Savings £75£75£75£75£75£75£75£75
AJ Bell Youinvest £40£100£200£200NoneNoneNoneNone
AXA Self Investor£70£175£350£520n/an/an/an/a
Barclays Stockbrokers £70£175£350£910£30£30£30£30
Tilney Bestinvest£80£200£400£1,020£80£200£400£1,020
Charles Stanley Direct£50£125£250£650£50£125£150£150
Fidelity Personal Investing £70£175£350£520n/an/an/an/a
Interactive Investor £80£80£80£80£80£80£80£80
Halifax Share Dealing £12.50£12.50£12.50£12.50£12.50£12.50£12.50£12.50
Hargreaves Lansdown £90£225£450£1,150£45£45£45£45
iWeb*Only charge is £200 account opening fee
TD Direct £60£150£300£770NoneNoneNoneNone
The Share Centre £48£48£48£48£48£48£48£48
Trustnet Direct £50£125£200£200£50£125£200£200

*Assuming account opening charge of £200

Source: Investors Chronicle research, platform survey, all without VAT

 

The added costs of holding funds

Since 2014, you have paid separate fees to the fund managers you invest in, and the platform or broker you buy your investments from. That means that if you hold funds you need to consider what their ongoing charges could add to your total cost. Ongoing charges are the full cost levied by a fund manager for running a fund and can range between 0.08 per cent and 2.6 per cent, according to TD Direct. Many platforms offer discounts on these or offer very low-cost share classes on their platforms, and it is worth checking to see if you could get a better price on a different platform or find a suitable lower-cost fund elsewhere.

TD Direct example costs of investing in funds

£5,000£10,000£50,000£300,000
TD Platform fee£15£30£150£750
Fund manager fee £37.50£75£375£2,250
Total per year £52.50£105£525£3,100

Source: TD Direct.com

 

Trading costs

Although annual costs might seem high for some platforms, they may well become more appealing when the cost of dealing your investments is taken into account. The price of trading can soon add up, even if you are not a frequent trader, with brokers regularly charging £10 and over for every trade. Several platforms do not charge at all for fund dealing. Those are:

■ AXA Self Investor

■ Tilney Bestinvest

■ Fidelity Personal Investing

■ Charles Stanley Direct

■ Hargreaves Lansdown

■ TD Direct

AJ Bell YouInvest also charges less for fund trading than stock dealing. Most platforms offer discounts for regular traders and Interactive Investor also gives savers two free trades per quarter as part of the annual charge of £80. Halifax Share Dealing carries a rock-bottom annual fee but charges £12.50 per trade - which is also TD Direct's standard rate and Alliance Trust Savings' charge.

 

Transfer-out fees

You are able to transfer your Isa from one provider to another at any time, but be warned - providers will charge you to leave. Among the most expensive are AJ Bell, iWeb, Hargreaves and The Share Centre, all of which charge £25 per line of stock. Interactive Investor gives new customers who have been with the platform for under a year the chance to transfer out 10 lines of stock for free. AXA Self Investor, Fidelity Personal Investing and TD Direct charge no transfer-out fees.

 

Platform/brokerIsa transfer out charge 
Alliance Trust Savings £100
Charles Stanley Direct£10 per stock/fund
Halifax Share Dealing First 10 lines of stock free within one year, £15 per holding afterwards
Trustnet Direct £15 per line of stock
Interactive Investor £15 per line of stock, if within first 12 months first 10 lines of stock transferred for free 
AJ Bell Youinvest £25 per holding 
Tilney Bestinvest£25 per holding 
The Share Centre £25 per line of stock
Hargreaves Lansdown £25 per line of stock 
iWeb£25 per line of stock, maximum £125
Barclays Stockbrokers £30 per holding 
Fidelity Personal Investing Free
TD Direct Free
AXA Self InvestorFree

Source: Investors Chronicle research, platform survey

 

Platform/brokerAnnual charges Online trading costsTransfer-out fees
Alliance Trust Savings £75 (£18.75 per quarter)£12.50 online, loyalty discount after 5 years£100 plus VAT 
AJ Bell Youinvest Funds: 0.2% custody charge for funds capped at £200 p.a. Stocks, shares ETFs: No charge Shares: 0-9 p.month £9.95 >10 £4.95. Funds: £4.95£25 per holding 
AXA Self InvestorFunds: 0.35% <£250k, 0.2% > £250k. No share dealingFreeFree
Barclays Stockbrokers Funds: 0.35%. Stocks and shares: £30 admin fee (no admin fee if funds only). 1-9 p.month £11.95, 10-19 £8.95, 20+ £5.95£30 per holding
Tilney Bestinvest0.4% £0-£250k, 0.2% £250k-£1m, >£1m, no charge (amount up to £250k charged at 0.4% and over at 0.2%)Fund dealing free, £7.50 for share dealing£25 per holding 
Charles Stanley DirectFunds: 0.25%, Stocks and shares: 0.25% (min £20 max £150 p.a.)Fund dealing free, £10 for stock dealing£10 per holding 
Fidelity Personal Investing £45 0-£7.5k, 0.35% £7.5k-£250k, 0.2% £250k-£1m. £3 per month fee if holding any investment trusts or ETFs. No share dealingFund dealing free Free
Interactive Investor £80Annual fee (charged quarterly) covers 2 free trades per quarter. £10 per trade after that. Frequent trading discounts apply£0 for <£10 lines of stock for new customers (under one year) £15 per line of stock afterwards
Halifax Share Dealing £12.50£12.50 per trade £25 per holding 
Hargreaves Lansdown Funds: 0.45% £0-£250k, 0.25% £250k-£1m, 0.1%, over £2m no charge (amount up to £250k charged at 0.45% and over at 0.25%). Stocks and shares: 0.45% max £45Fund dealing free. Shares: 0-9 £11.95, 10-19 £8.95, >20 £5.95£25 per line of stock 
iWeb£200 opening charge, no annual fees. £5 per trade £25 per stock, maximum £125
TD Direct Funds: 0.3% <£250k, 0.2% >£250k max £1,500 (amount up to £250k charged at 0.3% and over at 0.2%). Stocks and shares: No chargeFund dealing free, share dealing £5.95 for first three months, standard rate £12.50, frequent rate £8.95, active £5.95Free
The Share Centre £48Infrequent dealing 1%, min £7.50, frequent dealing £7.50 £25 per account 
Trustnet Direct 0.25% capped at £200 p.a.£10 per trade, £6 per trade for frequent traders£15 per line of stock

Source: Investors Chronicle and broker websites