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The trust route for you

Your investment style will determine whether you should buy investment trusts through a platform, broker or investment trust savings scheme
The trust route for you

Buying an investment trust can be highly cost effective, but charges will vary enormously depending on the route you take. Platforms are often seen as the most appealing way to buy them. But investment trust share schemes could still be a good option, particularly if you are investing for children.

 

Low costs for regular savers

Although platforms have taken ground from share schemes by driving down costs, share schemes remain a popular way to drip-feed money into a trust at a very low cost and most mainstream investment trust houses offer them (including Aberdeen, Alliance Trust, Baillie Gifford and Henderson).

The key selling point of these schemes is their low price tag. Share schemes usually only charge you to sell a fund, but consumer platforms and brokers commonly charge you every time you trade a fund and add on annual or quarterly administration fees, too.

A platform could charge between 0.25 per cent and 0.45 per cent each year on the value of your holdings, as well as an £8-£10 fee every time you deal. By contrast, an investment house such as Franklin Templeton lets you drip money into a trust with a minimum lump sum of £250, or monthly sums of £50. It does not charge an annual fee, administration fee or make you pay to top up your investment. Investors keen to save regularly into popular Baillie Gifford trust Scottish Mortgage (SMT) could do so with a minimum monthly investment of £30 and would not be charged except to sell the trust (£22).

Many investment trusts also offer individual savings accounts (Isas) and junior Isas, but these can carry slightly higher charges compared with share schemes.

 

Pound-cost averaging benefits

Share schemes are particularly suitable for investors wanting to regularly put a small amount of money into the same trust. This practice of regularly paying in the same amount is also a good way to ride out market volatility through pound-cost averaging. You can smooth out returns by investing the same amount each month, enabling you to purchase more shares when prices are low and fewer shares when prices are high.

 

Lump-sum investors

But if you have a large amount to invest you are unlikely to want to put all your eggs in one basket. The major downside of share schemes is that you are tied to one trust or trust provider. Fund platforms and supermarkets offer you greater flexibility to switch quickly in and out of funds within tax-efficient wrappers such as individual savings accounts (Isas) and self-invested personal pensions (Sipps). There are 464 investment trusts listed on the London Stock Exchange and many platforms and brokers offer the full range of those, as well as offshore trusts.

Colin Low, chartered financial planner at Kingsfleet Wealth, says: "Just because an investment trust is a good buy, it doesn't mean you should hold on to it. On platforms you can easily sell and purchase replacement trusts and for a lump sum investor platforms make a lot of sense.

"If you are making regular savings into a fund and the manager starts to underperform or leaves the fund, it is a nuisance to pull out your regular investment and invest it elsewhere and you may incur capital gains tax when you do. With a platform you have much more control and it is easier to make the change."

He adds: "If you are putting money into a sole provider on a regular savings plan you are less inclined to make a switch because you've got to make an encashment. A platform gives you the way out and also gives you more in the way of choice."

 

Platforms: Cost efficiencies for large lump sums

Because of the way fund platforms charge, many are as cost-effective for those with large lump sums to invest as well as offering more choice. Platforms with flat fees benefit larger pots. Alliance Trust Savings and Interactive Investor both charge flat fees for Isas and Sipps, with Alliance Trust Savings charging just £18.95 per quarter plus VAT on its Isa account and £155 plus VAT annually on a Sipp savings account. Interactive Investor charges just £80 plus VAT in Sipp administration charges and £80 per year to spend on trades.

Alliance Trust Savings gives access to 350 investment trusts and Interactive Investor has 324 trusts on its platform.

Other platforms and brokers levy fees as a percentage of your total holdings. Hargreaves Lansdown, for example, charges 0.45 per cent on Sipp assets of 0-£250,000 and 0.10 per cent on assets between £1m to £2m. On top of that it charges 0.45 per cent on shares and trusts held. All that comes before the dealing costs levied by the platform.

 

Frequent traders and regular investing discounts

A major downside of platforms and brokers versus share schemes is the fact that they charge every time you want to deal, which can make them costly for those with small regular savings. For example, Barclays Stockbrokers charges £11.95 if you trade between one and nine times in a month. Someone putting aside £100-£200 every month would quickly see their savings eroded even with only one or two trades each month. Halifax Share Dealing charges a flat fee of £12.50 per trade, while brokers such as Killik & Co charge 1 per cent of the value of the trade as a fee.

Some platforms and brokers cut that cost for frequent traders. Barclays' fee of £11.95 is cut to £5.95 if you make more than 20 deals in a month and for AJ Bell Youinvest, dealing charges are cut from £9.95 to £4.95 if you trade over nine times in a month.

Most brokers and platforms also offer regular investing services for any deal you plan to make regularly, for example a trust you want to add to each month. AJ Bell offers regular dealing for 53 trusts, while others, including the Share Centre, offer this option for all the trusts on their platforms. Regular investing with the Share Centre reduces dealing costs to 0.5 per cent (with a minimum of £1), while TD Direct (which offers the service for all FTSE 350 listed funds) cuts dealing charges to £1.50. Halifax Share Dealing charges £2 per trade for regular investing.

Not all platforms and brokers offer the service, though, and notable exceptions include Tilney Bestinvest and Charles Stanley Direct.

 

Dividend reinvestment costs

Be aware that while share schemes are unlikely to charge you for dividend reinvestment, platforms and brokers will. This can be as much as a £5 charge, in the case of Alliance Trust Savings, or most commonly 1 per cent of the dividend value.

 

Brokers and platforms, number of trusts offered and dealing charges and discounts

Broker/ platform No. of trusts offeredOffers regular investing? How many trusts? Dealing cost?Dealing charges (online)Dividend reinvestment and if so, what charge?
AJ Bell Youinvest580Yes, 53 trusts, reduces dealing to £1.50 per trade£9.95 1-9 trades and £4.95 > 9 trades Only for regular investing
Alliance Trust Savings Ltd350Yes, all trusts, £1.50 per trade £12.50Yes, minimum £100 investment, £5 charge 
Barclays Stockbrokers Full range on LSENo1-9 deals £11.95, 10-19 £8.95, 20+ £5.95 (for Investment Isa)1% of div value (minimum £1.50 max £7.50)
Tilney Bestinvest 430No£7.50No
Charles Stanley Direct410No£10No
Fidelity Personal Investing5Yes, all trusts, no fee No charge or fees Yes, no fee
Halifax Share Dealing275Yes, all trusts (check), £2 £12.50Yes, 2% div value to max £12.50
Hargreaves Lansdown 500Yes, 81, £1.50 Between £5.95 and £11.95 per monthYes, 1% div value (£1 min max £10)
Interactive Investor324Yes, all trusts, £1.50£10Yes, 1% div value max £10
Investec Wealth & Investment????
Iweb Share Dealing275No£5Yes, 2% div value max £5
Killik & CoFull range on LSENo, but offers regular investing option in discretionary monthly savings plan in funds selected by Killik1.65% on first £25,000 and 0.5% on remainder. Minimum commission of £30No
Share Centre208 UK companies and several offshore companiesYes, 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 and value of dividend must exceed £%
TD Direct Investing (Europe) 500Yes, 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 less than 10Yes, £1.50 charge on minimum £10 div available for FTSE 350 trusts
Trustnet Direct539Yes, all trusts (check), £2 per month£10 per trade with frequent trader discount of £6 if trading over 10x per monthYes, 1% div value capped at 1%

Source: Investors Chronicle

 

Share schemes through platforms

As the cost of administering share schemes has grown less palatable for some trusts, they have started outsourcing them to platforms that charge annual or quarterly fees. Investors keen to make regular savings into Graphite Capital Management trusts, for example, now go via F&C Management, which charges an annual cost of £40, according to the Association of Investment Companies (AIC). Investors in Biotech Growth Trust (BIOG), meanwhile, can make minimum monthly payments of £50, but will be charged an annual fee of £18.75 as the scheme is now administered via Alliance Trust Savings. Henderson Trusts such as Henderson Global (HGL) are now administered through Halifax Share Dealing. Investors still benefit from the low £20 minimum monthly savings and no minimum on lump sums, but pay an annual cost of £12.50 for the service.

 

Saving for children

Share schemes are particularly appealing for investors with longer time horizons and those saving for children. "We've used savings schemes particularly for people saving for grandchildren," says Mr Low. It's a good way of setting up a savings plan and it is very low cost, as often all you pay is the fund charge. With platforms you have a dealing charge cost and a platform charge.

"If you are someone with a long-term time horizon and prepared to be in a fund that may not always be the best at every given time then that works well. We have used trusts such as Scottish Mortgage for people with grandchildren because it is an appropriate risk level for a 10-15-year investment period."

Many groups have launched schemes specifically designed for children's savings. Those 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. Some other providers have a gift facility that includes children.

The benefit of such a scheme is the fact that it is easier to set up a direct debit straight from your monthly income than save for a big lump sum, and the minimum monthly investments are very low, making it good for long-term saving. Even £30 a month for 18 years amounts to £6,480 without any capital growth.

 

Investment schemes and charges

Management groupMinimum monthly regular savingsMinimum lump sumDividend reinvestmentPurchase detailsCharges
Aberdeen Asset Managers£100£250YesMonthly: DD on 15th. Lump Sums: Daily.Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £10. Transfer Out: £35. Switch: £10.
Advance Emerging (through Jarvis Investment Management)£25£250YesMonthly: DD on 1st. Lump Sums: Daily.Initial Admin: Nil. Annual: Nil. Purchase: 1% (Lump Sum: £9.50). Sale: 1% (Lump Sum: £9.50). Transfer Out: £25. Switch: na.
Alliance Trust Savings£50£50YesReal 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£50YesReal 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£50YesReal 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£250YesMonthly: 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£250YesMonthly: 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£500YesMonthly: DD on 25th, invested same day. Lump Sums: invested same day.Initial Admin: Nil. Annual: Nil. Purchase: 1.25%. Sale: 1.25%. Transfer Out: 1.25%. Switch: 1.25%.
Caledonia Investments plc (through The Share Centre)£10£10YesMonthly: 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 Aberdeen Asset Managers)£100£250YesMonthly: DD on 15th. Lump Sums: Daily.Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £10. Transfer Out: £35. Switch: £10.
Edinburgh Partners£50£500YesMonthly: 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)YesDaily.Initial Admin: Nil. Annual: £40. Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil.
Fidelity£50£1,000 (top up £250)YesDaily.Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: Nil. Transfer Out: Nil. Switch: Nil.
Franklin Templeton Investments£50£250 (top up £50)YesMonthly: 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£50YesReal 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.
Graphite Capital Management (through F&C Management)£50£500 (top up £250)YesDaily.Initial Admin: Nil. Annual: £40. Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil.
Henderson Global Investors (through Halifax Share Dealing)£20No minimumYesDaily.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.
Invesco Asset Management£20£500YesMonthly: 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)YesMonthly: 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.
J.P. Morgan Asset Management£50£500 (top up £100)YesMonthly: DD on 1st or 16th. Lump Sums: Daily.Initial Admin: Nil. Annual: Nil. Purchase: £10. Sale: £10 (na for regular savers). Transfer Out: na. Switch: na.
Jupiter Asset Management£50£500YesMonthly: DD on 9th, invested on Thursday on or around 21st. Lump Sums: Daily.Initial Admin: Nil. Annual: Nil. Purchase: 1% (max £100) Sale: 1% (min £10, max £100). Transfer Out: Nil. Switch: 1% (max £100).
Martin Currie (through Alliance Trust Savings)£50£50YesReal 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£50YesReal 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£250YesMonthly: DD on 15th. Lump Sums: Daily.Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £10. Transfer Out: £35. Switch: £10.
Pantheon International Participations£10£1,000YesRegular: 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£5,000YesMonthly: 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.
RIT Capital Partners£20£250YesRegular Savings: next Dealing Day after the 10th business day of every month, after the payment is received. Lump Sums: next Dealing Day after cheque is received.Initial Admin: Nil. Annual: Nil. Purchase: 0.5%. Sale: 0.5%. Transfer Out: 0.5%. Switch: na.
Scottish Investment Trust plc (Plan Manager: SIT Savings)£25£250YesDaily.Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £12.50. Transfer Out: £30. Switch: na.
SL Capital Partners (through Standard Life Savings)£50£500YesMonthly: 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£1,000YesMonthly: 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 minimumNo minimimYesMonthly: 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£500YesDaily.Initial Admin: Nil. Annual: Nil. Purchase: 1% (online: £15). Sale: 1% (online: £15). Transfer Out: £20. Switch: 1% (online £15).

Source: The AIC.co.uk

 

Children's investment schemes and charges (sample of longer table)*

Management groupMinimum monthly regular savingsMinimum lump sumPurchase detailsInitial adminannual chargesOther charges
Aberdeen Asset Managers£30£150Monthly: DD on 15th. Lump Sums: Daily.Initial/Admin: Nil. Annual: Nil.Purchase: Nil. Sale: £10. Transfer Out: £30. Switch: £10.
Alliance Trust Savings£50£50Real time dealing available (on request).Initial/Admin: 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£100Cleared funds are dealt with Tuesdays and Fridays.Initial/Admin: Nil. Annual: Nil.Purchase: Nil. Sale: £22. Transfer Out: na. Switch: First free in any 12 month period, £22 thereafter.
BlackRock Investment Management (UK)£50£1,000Monthly: DD on 25th, invested same day. Lump Sums: invested same day.DailyPurchase: 1.25%. Sale: 1.25%. Switching: 1.25% (min £1,000)
Dunedin (through Aberdeen Asset Managers)£30£150Monthly: DD on 15th. Lump Sums: Daily.Initial/Admin: Nil. Annual: Nil.Purchase: Nil. Sale: £10. Transfer Out: £30. Switch: £10.
F&C Management£25£250Daily.Initial/Admin: Nil. Annual: £25.Purchase: £8 (online) £12 (post). Sale: £8 (online) £12 (post). Transfer Out: £12. Switch: Nil.
Graphite Capital Management (through F&C Management)£25£250Daily.Initial/Admin: 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)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.
Jupiter Asset Management£50£500Monthly: DD on 9th, invested on Thursday on or around 21st. Lump Sums: Daily.Purchase: 1% (max £100) Sale: 1% (min £10, max £100)
Martin Currie (through Alliance Trust Savings)£50£50Real time dealing available (on request).Initial/Admin: Nil. Annual: £10 per quarter.Purchase: £12.50 (online). £40 (phone & post). Sale: £12.50 (online). £40 (phone & post). Transfer Out: na. Switch: na.
JPMorgan Asset Management£50£500 (top up £100)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.
Witan Investment Services£50£250Daily.Initial/Admin: Nil. Annual: £30.Purchase: Nil. Sale: Nil. Transfer Out: Nil. Switch: na.

*All offer dividend reinvestment

Source: The AIC.co.uk