I would certainly welcome more IC articles/coverage on which online brokers are best for international trades plus more coverage of related issues/pitfalls such as overseas withholding tax.
I would also encourage you to shine a light on the hidden FX spreads being charged by popular online brokers. For example, TD Direct Investing charges a reasonable fixed dealing commission on international deals but a shocking (and hidden) 4 per cent additional spread on the currency conversion, which I believe is indefensible.
This was brought home to me when I recently sold a European stock and bought another with the proceeds. The (explicit) commissions were not unreasonable at £17.50 per trade (so £35 for both 'legs') but the FX loss on the spread for a €12,000 sale and reinvestment into another stock was £394... ie, more than 10 times the dealing commission!
On the basis that sunshine is the best disinfectant, some coverage of this issue in the IC would be very welcome.
Barney Whiter
Withholding tax woes
I agree with basic sentiment in your editorial ('The path less travelled', 17 May 2013). However, there is a serious disadvantage to holding high dividend-yielding shares in companies domiciled in jurisdictions such as the US and western Europe - witholding tax.
Each dividend I receive from Siemens has 25 per cent deducted. For US companies it is 15 per cent. In practice an individual can not recover it. This is so even if I hold the shares in an individual savings account (Isa). I believe Asian companies do not deduct withholding tax which makes them more attractive.
I do not know if a fund or investment trust or exchange traded fund (ETF) is able to recover the withholding tax (or be paid gross). If yes, can this gross dividend be passed on to the investor within an Isa or self-invested personal pension (Sipp)?
Can Investors Chronicle please consider producing an article on this subject? After publication the article could be held on the IC website as a work of reference.
If investors know the tax implications, then they are more likely to be encouraged to buy overseas shares, doing so in a tax efficient manner.
Lawman (via website)
Age versus common sense
Regarding the reader portfolio: 'At age 86, should I cash in my portfolio?', 26 April 2013, the two professional firms were bemused about the bank's advice to the 86-year-old to sell everything.
Let me explain. It is quite simple, after all. The bank (and sadly many/most financial advisers) have to 'advise' according to 'vulnerability' to the firm - not good advice and common sense.
The vulnerability says: if you advise someone over retirement age to invest in equities and they fall in value, prompting a complaint to the Ombudsman, they are likely to be awarded compensation, because equity related investments for someone over that age is 'wrong'.
The adviser may argue 'but the investor understood the risks and chose to pursue this strategy in view of their overall balanced assets'. The Ombudsman will say 'perhaps he did but you should have known better - compensate'.
Now, you may say that 'of course this can't be true' but I can provide the evidence to substantiate this. The banks were particularly hard-hit (Barclays especially) with the Aviva 'Balanced Fund' which fell markedly during the sell-off, arguably the worst investment and economic conditions for over 70 years.
Perhaps it was inappropriately flagged, but I bet most of those automatically-compensated investors have since been and put their money on deposit or in 'safe' bonds... and missed-out on all the recovery - the same 'over 65-year-olds' who no doubt will be those chasing better returns in a few years by buying the latest high-risk technology-style funds or whatever the next bubble happens to be.
So, can the bank be blamed, in that an existing investor is the same as a new one? Win and everyone's happy; lose and you'll be compensated. Sadly, we don't charge enough fees for that risk - despite what we 'know' is the best mix of assets for every investor.
However, should I reach the ripe-old-age of 100, I shall still have most of my money in equities to pass down the generations, as well as a useful mix of other assets. While just qualifying for Saga, I have done very nicely thank you (and for our clients) in going against the grain of pressures from 'everyone' to conform over the last few years as we embraced the phenomenal recovery - and despite the 'risks' to us for buying such foolishly undervalued assets when everyone else was giving them away.
Philip J Milton
DipFS CFPCM FCIB FPFS, Chartered Financial Planner, Fellow of The Personal Finance Society
