Picking an investment trust with good performance is very important but so are the costs of buying the trust, which if too high can eat into substantial amounts of your returns. The ongoing charge - the cost of the actual trust - is an important consideration. However, another less obvious but also very significant element is the costs of acquiring the trust.
Many investors buy investment trust shares via a broker or trading platform, but you could also acquire them via an investment trust savings scheme. Both options have their advantages and disadvantages, and ultimately, your personal circumstances will be the defining factor as to which makes more sense for you. We have set out some of the main things you need to consider when determining the best way to acquire investment trust shares.
Investment trust saving schemes: the arguments in favour
Investment trusts share schemes allow individuals to make regular payments into a particular trust or group of trusts that are managed by the same provider. Most of the large investment trust managers offer them, such as Aberdeen, Baillie Gifford, Henderson and JPMorgan.
The schemes are useful for individuals seeking to grow their investment pot as they allow you to drip-feed money into trusts at a very low cost.
This can be helpful for investors saving towards medium and long-term goals such as house deposits, school or university fees, and weddings. They are also beneficial to new investors as you can start investing with a monthly contribution or lump sum of just £10.
Unlike platforms and brokers which will typically charge between £8-£12 every time you buy or sell a trust, many of these schemes will only charge you to sell a trust. In addition a platform, could also charge between 0.25 per cent and 0.45 per cent each year on the value of your holdings. In contrast, some schemes, such as those offered by Investec Asset Management, Personal Assets Trust and Standard Life Savings – charge no set up, administration or dealing fees.
Share schemes have no maximum investment limits and there is no limit on the number of schemes you can hold. If you're prepared to stay on top of the administration of holding several investment trusts through different schemes this could be a cheaper way of holding them than a platform.
Share schemes are also useful because they tend to allow you to reinvest dividends - a vital wealth growing function- which some platforms do not facilitate. The practice of making regular contributions and reinvesting your dividends helps you ride out market volatility through pound cost averaging. This is because when prices are high you will purchase fewer shares in the investment trusts, and when they are low you will purchase more.
According to the Association of Investment Companies (AIC) the majority of share schemes, like platforms, hold your assets on a nominee basis. This means the shares are held on your behalf by a registrar. This has the advantage of keeping costs down, but you are considered the beneficial owner of the shares not the legal owner. As a beneficial owner of the shares, you will not automatically receive shareholder rights such as being able to attend annual general meetings (AGMs), and receiving company accounts and reports directly.
On many platforms you need to opt in to receive these rights and many charge you extra to access them. However accessing your shareholder rights tends to be easier through share schemes.
"Although you will still be held in a nominee account within an investment trust saving scheme you have a direct relationship with the management group, so it's very easy for them to pass shareholder rights onto you as they know about you," explains Annabel Brodie-Smith, communications director at the AIC.
The low costs and regular investment features of share schemes make them particularly appealing for parents and grandparents, saving for children and grandchildren. A number of management groups run schemes specifically designed for children's savings. These include Aberdeen, Alliance Trust Savings, Witan and F&C. Most of those operate designated or bare trust options, which get around the issue of under 18s not being able to hold company shares in their own name. Other providers have a gift facility that includes children.
The good thing about using a trust for children's saving instead of a Junior Individual Saving Account (Jisa) is that you retain control over when the child receives the money.
Ms Brodie-Smith says: "You can buy a Jisa through a platform or a share scheme and the advantage of doing that is that they are tax efficient. But when the child turns 18 the account converts into an adult Individual Savings Account (Isa), and if you've got a rebel who you think is going to blow the money, then there’s nothing you can do. With share schemes, however, you have discretion over the investment."
Disadvantages
Share schemes do not offer tax breaks, unlike Isas which are exempt from income, dividends and capital gains tax.
Another major downside of these schemes is that you will often be tied to one trust or trust provider, and if you have a large amount to invest you are unlikely to want to put all of your eggs in one basket as this increases your risk. If you have a large portfolio of investments it is also going to be harder to keep on top of all your investments if you are using multiple schemes. In this situation using a platform may be a better option.
The line between platform and investment trust saving scheme is becoming blurred in some instances as several providers have outsourced their schemes to platforms that charge annual or quarterly fees. For example, Henderson's investment trust saving scheme is now administered by Halifax Share Dealing. Investors in this scheme still benefit from the low £20 monthly saving minimum, and there is no minimum investment level for lump sums, but there is an annual cost of £12.50 for the service.
Investment trust savings schemes and charges
Name | Min monthly regular savings | Min lump sum | Dividend reinvestment | Purchase details | Charges |
Aberdeen Asset Managers | £100 | £250 | Yes | Monthly: DD on 15th. Lump Sums: Daily. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £10. Transfer Out: £35. Switch: £10. |
Alliance Trust Savings | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
AllianzGI Europe (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
Artemis Investment Management (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
Asset Value Investors | £50 | £250 | Yes | Monthly: DD on 15th. Lump Sums: Daily. | Initial Admin: Nil: Annual: 0.5% (max £50). Purchase: Nil. Sale: tel: £15 (min), online: £11.95. Transfer Out: £35. Switch: na. |
Baillie Gifford Savings Management | £30 | £250 | Yes | Monthly: DD on 1st or 15th, invested on next dealing day normally either Tuesdays and Fridays. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £22. Transfer Out: na. Switch: £22 (First switch in any 12-month period is free). |
BlackRock Investment Management (UK) | £50 | £500 | Yes | Monthly: DD on 25th, invested same day. Lump Sums: invested same day. | Initial Admin: Nil. Annual: Nil. Purchase: 0.75% (max £15). Sale: 0.75% (max £15). Transfer Out: 0.75% (max £15). Switch: 0.75%. |
Caledonia Investments plc (through The Share Centre) | £10 | £10 | Yes | Monthly: DD on 3rd, 16th or 30th. | Initial Admin: Nil. Annual: Nil. Purchase: 0.5% (Monthly: min £1.50. Lump Sum: min £15) Sale: 1% (min £15). Transfer Out: £20. Switch: na. |
Dunedin (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
Edinburgh Partners | £50 | £500 | Yes | Monthly: DD on 18th. Lump Sums: Daily. | Initial Admin: Nil. Annual: Nil. Purchase: 0.2%. Sale: 0.2%. Transfer Out: £12. Switch: na. |
F&C Management | £50 | £500 (top up £250) | Yes | Daily. | Initial Admin: Nil. Annual: £40. Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil. |
Franklin Templeton Investments | £50 | £250 (top up £50) | Yes | Monthly: DD on 5th, invested by 15th. Lump Sums: By Friday of week following receipt. | Initial Admin: Nil. Annual: Nil. Purchase: 1% (min £1.50). Sale: £10.85. Transfer Out: na. Switch: na. |
Frostrow (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
Henderson Global Investors (through Halifax Share Dealing) | £20 | No minimum | Yes | Daily. | Initial Admin: Nil. Annual: £12.50. Purchase: from £15 (£11.95 online). Sale: from £15 (£11.95 online). Transfer Out: from £15. Switch: Purchase & Sale commissions apply. |
Intermediate Capital Group (through F&C Management) | £50 | £500 (top up £250) | Yes | Daily. | Initial Admin: Nil. Annual: £40. Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil. |
Invesco Asset Management | £20 | £500 | Yes | Monthly: Cleared by 15th. Lump Sums: Daily. | Initial Admin: Nil. Annual: Nil. Purchase: 0.5%. Sale: 0.5%. Switch: 0.5%. |
Investec Asset Management | £50 | £250 (top up £100) | Yes | Monthly: Money cleared by 15th. Lump Sums: Weekly on Wednesday after money cleared. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: Nil. Transfer Out: Nil. Switch: na. |
JP Morgan Asset Management | £50 | £500 (top up £100) | Yes | Monthly: DD on 1st or 16th. Lump Sums: Daily. | Initial Admin: Nil. Annual: Nil. Purchase: £10. Sale: £10 (N/A for regular savers). Transfer Out: N/a. Switch: na. |
Martin Currie (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
NVM Private Equity (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial Admin: Nil. Annual: £18.75 per quarter. Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: £60. Switch: na. |
OLIM (through Aberdeen Asset Managers) | £100 | £250 | Yes | Monthly: DD on 15th. Lump Sums: Daily. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £10. Transfer Out: £35. Switch: £10. |
Pantheon International | £10 | £1000 | Yes | Regular: DD on either 3rd, 16th or 30th each month. Lump: Daily. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: Nil. Transfer Out: na if 3-5 days. Switch: £15. |
Personal Assets Trust | £500 | £5,000 | Yes | Monthly: DD collected on 1st and invested on next available dealing day. Lump sums: Dealing twice weekly on Wednesdays and Fridays as soon as practicable following receipt. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: Nil. Transfer Out: na. Switch: na. |
Scottish Investment Trust plc (Plan Manager: SIT Savings) | £25 | £250 | Yes | Daily. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £12.50. Transfer Out: £30. Switch: na. |
SL Capital Partners (through Standard Life Savings) | £50 | £500 | Yes | Monthly: DD on 1st, invested after 5 business days. | Initial Admin: 1.25%. Annual: Nil. Purchase: Nil. Sale: Nil. Transfer Out: na. Switch: na. |
Standard Life Savings | £100 | £1,000 | Yes | Monthly: DD on 1st, invested after 5 business days. | Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: Nil. Transfer Out: na. Switch: na. |
Troy Asset Management (through Equiniti) | No minimum | No minimim | Yes | Monthly: DD on 4th. Lump Sum: Real time. | Initial Admin: Nil. Annual: Nil. Purchase: £1.75 - £12.50 (online). £15 - £75 (phone). Sale: £1.75 - £12.50 (online). £15 - 75 (phone). Transfer Out: £35. Switch: Nil. |
Witan Investment Services | £50 | £1,000 | Yes | Daily. | Initial Admin: Nil. Annual: £30. Purchase: £0 for regular and/or dividend reinvestment; £15 lump sum dealing fee. Sale: £15 lump sum dealing fee. Transfer Out: £20. Switch: £15. |
Source: AIC
Platforms: the arguments in favour
The main advantages of using a broker or investment platform is that you will have access to a much wider range of investment trusts in one place than the number offered by a single investment trust scheme. There are more than 400 investment trusts listed on the London Stock Exchange, and many platforms and brokers offer the full range.
Platforms also allow you to hold a number of different type of investments in one place, meaning you could hold your investment trusts alongside your other investments such as open-ended funds and shares.
David Liddell, chief executive of online investment service IpsoFacto Investor, says platforms are often better suited to those wanting to make complex investment decisions, such as managing a retirement income.
"For more active investors who have already built up a portfolio and are used to managing it themselves, using a platform can be a better option than using a share scheme - provided that costs are reasonable," he says. "Most of the platforms these days give you a very wide choice of assets, so this makes it easier for investors to switch around and make use other of assets like exchange traded funds (ETFs) and open-ended funds."
Unlike share schemes, platforms also offer greater flexibility in switching in and out of tax-efficient wrappers such as Isas and self-invested personal pensions (Sipps).
If you have a large portfolio the flexibility, range of investment choices and tax efficient wrappers platforms offer may be more important to you than the ability to make small, regular contributions to a share scheme. And as long as you choose your platform carefully, you can minimise costs: for example, choosing a platform which charges flat account management fees rather than a percentage of your holdings.
Alliance Trust Savings has flat fees for Isas and Sipps, charging £7.50 per month plus VAT on its Isa account and £15 plus VAT a month on its Sipp savings account. Interactive Investor, meanwhile, charges £80 plus VAT for annual Sipp administration.
Platform downsides:
Not all platforms charge a flat fee to hold your assets, and many use a percentage based system. For example, Hargreaves Lansdown charges 0.45 per cent of the value of your investment trusts to hold them in its Vantage Sipp, capped at £200 a year. This is before the dealing costs levied by the platform.
As well as account management fees, you need to watch out for other fees platforms and brokers charge such as fees to vote at or attend annual general meetings, inactivity fees and dividend reinvestment fees. Investment trust share schemes often don't charge these.
For example while share schemes are unlikely to charge you for dividend reinvestment, platforms and brokers - where they offer it - will. This can be as much as a £5 charge, in the case of Alliance Trust Savings, or more commonly 1-2 per cent of the dividend value.
Brokers and platforms, number of trusts offered and dealing charges and discounts
Broker/ platform | No. of trusts offered | Offers regular investing? How many trusts? Dealing cost? | Dealing charges (online) | Dividend reinvestment and if so, what charge? |
AJ Bell Youinvest | Full range on LSE | Yes, 203 trusts, reduces dealing to £1.50 per trade | £9.95 1-9 trades and £4.95 > 9 trades | No |
Alliance Trust Savings | 325 | Yes, all trusts, £1.50 per trade | £12.50 | Yes, minimum £100 investment, £5 charge |
Barclays Stockbrokers | Full range on LSE | No | 1-9 deals £11.95, 10-19 £8.95, 20+ £5.95 (for Investment Isa) | 1% of dividend value (minimum £1.50 max £7.50) |
Tilney Bestinvest | 323 | No | £7.50 | No |
Charles Stanley Direct | Full range on LSE | No | £10 | No |
Fidelity Personal Investing | 5 | Yes, all trusts, no fee | No charge or fees | Yes, no fee |
Halifax Share Dealing | 344 | Yes, all trusts, £2 | £12.50 | Yes, 2% dividend value to max £12.50 |
Hargreaves Lansdown | 360 | Yes, 97, £1.50 | 1-9 deals £11.95, 10-19 £8.95, 20+ £5.95 | Yes, 1% dividend value (£1 min max £10) |
Interactive Investor | 355 | Yes, all trusts, £1.50 | £10 | Yes, 1% dividend value max £10 |
Iweb Share Dealing | 344 | No | £5 | Yes, 2% dividend value max £5 |
Killik & Co | Full range on LSE | No, but offers regular investing option in discretionary monthly savings plan in funds selected by Killik | 1.65% on first £15,000 and 0.5% on remainder. Minimum commission of £30 | No |
Share Centre | Full range on LSE | Yes, all trusts, 0.5% per deal (minimum £1) | 1%, minimum £7.50, frequent dealing option £7.50 plus £20 quarterly charge (+VAT) | Yes, 0.5% of value of dividend |
TD Direct Investing (Europe) | Full range on LSE | Yes, FTSE 350-listed trusts, £25 minimum investment and £1.50 dealing | £5.95 introductory rate and >20 trades in last three months, £8.95 >10 trades in last three months, £12.50 1-9 trades in last three months | Yes, £1.50 charge on minimum £10 dividend available for FTSE 350 trusts |
Trustnet Direct | Full range on LSE | Yes, all trusts, £2 per month | £10 per trade, £6 per trade for frequent traders if trading more than 10x per month | 1% of the value of the dividend paid (capped at £10) |
Willis Owen | 43 | Yes, all trusts, £1.50 | £7.50, min. trade order is £100 | £1.50 per reinvestment up to a maximum of £15 per year |
Source: Providers/Investors Chronicle
Children's investment schemes and charges
Name | Min monthly regular savings | Min lump sum | Dividend reinvestment | Purchase details | Initial admin / annual charges | Other charges |
Aberdeen Asset Managers | £30 | £150 | Yes | Monthly: DD on 15th. Lump Sums: Daily. | Initial/Admi: Nil. Annual: Nil. | Purchase: Nil. Sale: £10. Transfer Out: £30. Switch: £10. |
Alliance Trust Savings | £50 | £50 | Yes | Real time dealing available (on request). | Initial/Admi: Nil. Annual: £10 per quarter. | Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: na. Switch: na. |
Baillie Gifford Savings Management | £25 | £100 | Yes | Cleared funds are dealt with Tuesdays and Fridays. | Initial/Admi: Nil. Annual: Nil. | Purchase: Nil. Sale: £22. Transfer Out: na. Switch: First free in any 12 month period, £22 thereafter. |
Dunedin (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial/Admi: Nil. Annual: £10 per quarter. | Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: na. Switch: na. |
F&C Management | £25 | £250 | Yes | Daily. | Initial/Admi: Nil. Annual: £25. | Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil. |
Intermediate Capital Group (through F&C Management) | £25 | £250 | Yes | Daily. | Initial/Admi: Nil. Annual: £25. | Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil. |
J.P. Morgan Asset Management | £50 | £500 (top up £100) | Yes | Monthly: DD on 1st or 16th. Lump Sums: Daily. | Initial/Admin: Nil. Annual: Nil. | Purchase: £10. Sale: £10 (na for regular savers). Transfer Out: Nil. Switch: Nil. |
Martin Currie (through Alliance Trust Savings) | £50 | £50 | Yes | Real time dealing available (on request). | Initial/Admi: Nil. Annual: £10 per quarter. | Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: na. Switch: na. |
Scottish Investment Trust plc (Plan Manager: SIT Savings) | £25 | £250 | Yes | Daily. | Initial/Admi: Nil. Annual: Nil. | Purchase: Nil. Sale: £12.50. Transfer Out: £30. Switch: na. |
Witan Investment Services | £50 | £250 | Yes | Daily. | Initial/Admi: Nil. Annual: £31.60. | Purchase: Nil. Sale: Nil. Transfer Out: Nil. Switch: na. |
Source: AIC