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Barclays new platform maybe more expensive for larger portfolios

Several readers have contacted us about changes Barclays has made to its investment platform. We've investigated to help investors decide what they should do
July 20, 2017

Barclays (BARC) is overhauling its DIY investment platform to make its service, which was geared towards share investing, more cost-effective and user-friendly for investors buying funds. The shift will benefit buy-and-hold investors who want to hold both funds and shares, as they are likely to pay less with the new Barclays Smart Investor service than with the Barclays Stockbrokers model. But customers with large portfolios could pay more, and those who have access to a spouse's account or hold multiple accounts under one name will no longer be able to.

What is happening to Barclays and why?

The switch from Barclays Stockbrokers to Smart Investor will take place on 28 August 2017. The aim is to modernise Barclays’ service from a stockbroking business that favours frequent traders and sharedealers over buy-and-hold fund investors. Clare Francis, head of customer engagement and content, says: "We decided that rather than just upgrade the stockbrokers site, it made sense to start again and build something completely new. Overall, we feel that it's a fairer model that means the cost and charges you pay are reflective of your activity and portfolio size, and there are no hidden charges that are common with investing because they're all wrapped up into one fee."

>The aim is to modernise Barclays' service from a stock-broking business that favours frequent traders and share dealers over buy-and-hold fund investors

Who will benefit?

DIY investors with fund portfolios will benefit from reduced annual charges, which will undercut many low-cost platforms. Barclays has cut its fee on fund holdings from 0.35 per cent of assets to just 0.2 per cent of assets per year. Fees will be charged monthly and be subject to a monthly minimum charge of £4 - or £48 a year. An investor with between £0 and £250,000 held in funds will pay less with Smart Investor than with AJ Bell Youinvest, which charges 0.25 per cent on fund holdings up to £250,000, Bestinvest.co.uk, which charges 0.4 per cent for that amount, and Charles Stanley Direct, which charges 0.25 per cent. At present an investor would pay more to hold funds with a value of up to £250,000 with Barclays Stockbrokers than with those platforms.

Annual charges for a £100,000 shares and funds portfolio
New charge£150
Current Isa charge£211
Current general dealing acount including inactivity fee £232.60

Source: Barclays and Investors Chronicle

Total costs for a £250,000 funds portfolio with 12 trades a year
New charge£536
Current Isa charge£875
Current general dealing acount including inactivity fee £875
Source: Barclays and investors Chronicle

There will be a £500 a year annual charge to hold £250,000 in a Smart Investor individual savings account (Isa) in funds compared with £874 per year to hold the same amount under Barclays' current charging structure due to Smart Investors' 0.15 per cent cut in annual charge. 

Barclays new single per-customer charge will include exit fees and transfer fees, which are currently charged separately to the annual fee. Exit fees can be substantial for those wanting to sell out of investments: for example, Hargreaves Lansdown charges £25 per line of stock to transfer out shares and Charles Stanley Direct charges £10 per holding to withdraw shares from an Isa.

Buy-and-hold investors will also benefit from lower dealing fees and will no longer pay more for trading less. Smart Investor will charge £3 per fund trade and £6 per stock, exchange traded fund (ETF) or investment trust trade, down from a maximum of £11.95 per trade. Barclays Stockbrokers currently tiers its dealing fee based on the volume of trades made, charging either £5.95, £8.95 or £11.95 to trade funds and shares, with the most frequent traders paying the lowest fee and customers trading between one and nine times in the previous month paying £11.95. Those who trade more than 20 times in a particular month are charged £5.95. 

Smart Investor will be cheaper for dealing shares and funds than platforms such as Alliance Trust Savings, which charges £9.99 per trade regardless of investment type, and Halifax Share Dealing, which charges £12.50 per trade. AJ Bell Youinvest charges £9.95 per deal, although that reduces to £4.95 if customers trade 10 or more times in one month, and Bestinvest charges £7.50 per share trade.

Barclays hopes to appeal to investors who want an easy-to-use and transparent online investment portal, and customers who already bank with Barclays will be able to access all of their accounts in one place. 

Barclays old and new charges

 Current feesSmart Investor fees
Dealing fees 1-9 deals in month £11.95, 10-19 deals £8.95, 20+ deals £5.95£3 for funds, £6 for other investments 
Annual fees Admin fees: Isa: half-yearly charge of £15 + VAT. General investment account: £12 + VAT per quarter if no trade is placed in the quarter. Sipp: £155 + VAT per annum (£38.75 + VAT per quarter). Fund Administration Fee: 0.35%  per year, min £35 per annum per account. No further change on fund holdings over £500,000Customer fee: 0.2% fund holdings, 0.1% assets in other investments (£200,000 cap exclusive to Barclays Stockbrokers customers). Sipp admin fee £125 + VAT per year
Source: Barclays  

 

People it will not benefit

However, customers with large share portfolios may pay more under the new model. Barclays customers holding stocks, investment trusts and ETFs will pay a percentage-based fee of 0.1 per cent of assets they hold instead of a single fixed annual fee of £30 plus value added tax (VAT). Currently customers with a Barclays Stockbrokers Isa or general investment account can pay just £36 a year, but the new minimum charge for any account will be £48. Fixed fee models benefit investors with larger portfolios, as they pay the same cost even as the size of their assets increases.

Ms Frances says: "Without a doubt there will be some Barclays customers who will pay more than they do currently, but the vast majority will pay less."

To mitigate the fee increase for customers with larger stock portfolios, for the next three years Barclays will not charge for assets over a value of £200,000 held in investments other than funds, such as ETFs, investment trusts and shares. So, for example, an investor with a £500,000 share portfolio would pay a maximum annual charge of £200 a year. But that is still far higher than the £36 per year they would currently pay.

"Providing you hold a small to medium amount of money in funds and equities you will be slightly better off [with Smart Investor]," says Steve Nelson, head of research at consultancy The Lang Cat. "If you have a chunky portfolio of stocks and shares, however, the 0.1 per cent charge might bite a little. There is no magic amount but we typically say that when your portfolio reaches six figures, you are likely to save a lot of money by opting for a platform with fixed fees."

Annual charges for a £500,000 shares only portfolio 

New Isa  £200
Current Isa  £36
Current general dealing account including inactivity fee £57.60

Source: Barclays and Investors Chronicle

Total annual cost  for a £500,000 shares only portfolio with 12 trades per year

New cost£272.00
Current Isa cost£179.4
Current general dealing account cost £200.60

Source: Barclays and Investors Chronicle

Investors wanting to mainly deal shares in an Isa or general investment account who have large portfolios may prefer an investment platform that charges a flat fee instead of a percentage-based fee. Such platforms include Hargreaves Lansdown, The Share Centre and Interactive Investor.

Hargreaves Lansdown caps its annual fee for portfolios of shares, investment trusts, ETFs and bonds at £45 per year for Isas and £200 for self-invested personal pensions (Sipps), and does not charge an annual fee for a general investment account. For share portfolios of £250,000 or less Smart Investor's annual charge will be lower, but Hargreaves Lansdown is likely to be more cost effective for larger portfolios of shares, ETFs and investment trusts. For example, a new Barclays Smart Investor customer could pay up to £500 in annual fees compared to £45 with Hargreaves Lansdown.

Other platforms with a fixed fee structure include AJ Bell Youinvest, which caps its annual fee at £30 per year for shares-only portfolios held in Isas. But Hargreaves Lansdown and AJ Bell Youinvest charge infrequent traders more than Smart Investor to deal stocks and shares so, depending on the size of your portfolio and the amount you want to deal, the saving might not be great. 

Frequent dealers may also be better off looking for a platform that charges lower dealing fees, or reduces dealing fees for frequent trades. And fund investors may want to opt for a platform that does not charge to buy and sell funds. Examples include Hargreaves Lansdown, TD Direct Investing and Fidelity Personal Investing. However, Smart Investor will be cost competitive for investors dealing both funds and shares infrequently.

Fidelity Personal Investing offers free fund dealing, but charges 0.1 per cent of the value of an investment trust or ETF trade. 

iWeb doesn't have annual charges but levies a one-off set-up fee of £25 to open an Isa or general dealing account. It charges £5 per deal for every kind of security.

 

DIY investment platform cost comparison

ProviderAnnual charges – Isas and dealing accounts*Flat/ fixed fee for shares?Extra Sipp charges?Cost per fund trade Cost per share trade
Alliance Trust Savings£120 pa (includes 4 free trades) No£17.50 + VAT per month (including 4 free trades) £9.99£9.99
AJ Bell YouInvestFunds: 0.25% < £250k0.10% £250k - £1m0.05% £1m - £2m> £2m, no charge Shares: 0.25% max £7.50 per quarter (£30 per year)YesNo £1.50£9.95, £4.95 if 10 or more trades in previous month 
Barclays Smart InvestorFunds: 0.20% on all assetsShares: 0.10% o all assetsMin £48 and max £1,500 per year for all Yes£150 per year£3.00£6.00
Bestinvest 0.4% £0-£250k0.2% £250k-£1m>£1m, no chargeNo0.35% not 0.4% on first £0-£250kFree£7.50
Charles Stanley Direct Funds: 0.25% <£250k0.20% £250k - £500k0.15% £500k - £1m0.05% £1m - £2m> £2m, no charge Shares: 0.25% min £24 max £240 per year, (charged per month, waived if one trade made within month)Yes£120 annual fee, waived if you hold more than £30,000 across accounts Free£11.50
Close Brothers 0.25%NoNo Free£8.95
ClubFinanceNo fee providing 3 trades per quarter. Otherwise £60 per yearYesna£4.95£4.95
EQ ShareviewShares: 0.50% pa with £24 min and £90 max for Isa. No annual charge for dealing account Nonana£12.50
Fidelity Personal Investing 

Funds: £45 < £7.5k0.35% £7.7k - £250k0.20% £250k-£1m(charge applies to whole portfolio when threshold reached.)<£1m, no charge

ETFs and investment trusts: Max £45 per quarter (£180 per year) 

YesNo Free0.10% dealing fee
Halifax Share Dealing £12.50 per year for Isa. No charge for dealing accountYesDifferent charging structure - £90 pa < £50k£180 pa > £50k £12.50£12.50
Hargreaves Lansdown Funds: 0.45% £0-£250k0.25% £250k-£1m0.1% £1m - £2m> £2m, no chargeShares: 0.45% max £45 per yearYesNo, but shares annual fee capped at £200 per year not £45 Free£11.95. £8.95 if 10-19 trades in previous month. £5.95 if 20 trades or more in previous month 
HSBCFunds: 0.39%Shares: £10.50 quarterly YesNo Free£10.50
iDealing £20.00 paYes £20.00 pa per platform feena£9.90
Interactive Investor£20 quarterly fee (£80 per year, comes with 2 free trades per quarter) YesNo £10. £5 for rest of month if paid for 10 full price trades that month £10. £5 for rest of month if paid for 10 full price trades that month 
iWeb£25 one-off account opening fee for Isa and dealing account Yes£90 pa < £50,000 £180 pa > £50,000 £5£5
Selftrade 

Funds: 0.30% < £50k0.25% £50k - £250k0.15% on assets over £250kMax £250 charge per quarter (£1000 pa)

Shares: No charges but inactivity fee of £8.75+VAT per quarter if no trades made within the previous quarter. 

No£118.80 paFree for buys, £11.75 per sell£11.75, £9.99 for ETFs. £6.00 if 20 trades placed in a month across all accounts 
TD Direct Investing 0.30% < £250k0.20% > £250k (min £20 per year, max £200). Isa has £36 per year charge on balance below £5.1k.NoAdditional charge of 0.25% taken twice a year. Min £96 per year max £240Free£12.50. £8.95 if 10-19 trades in previous 3 consecutive months. £5.95 per trade if 20 trades or more.
The Share Centre Share account - £1.50 per month  + VAT (£21.60 per year), Isa - £4.00 per month + VAT (£57.60 per year)No£172.80 per year incl VAT1% of deal (min £7.50). 1% of deal (min £7.50). 
Source: The Lang Cat and provider websites
*Unless stated otherwise, 'shares' includes investment trusts, ETFs and bonds 

 

Services Barclays will no longer offer

Customers will not be able to hold multiple investment accounts of the same type under one name with Smart Investor. The idea of this is to bring together all customers’ accounts and assets in a single place online and enable them to manage all their assets via one online dashboard.

Barclays is also scrapping its old Market Master general investment account, which carried no annual charge if customers traded more than once per quarter, and replacing it with a new investment account. This means that customers with multiple trading accounts, for example, will no longer be able to hold those. And they could end up paying more in annual fees than in the past, because they will be charged by the volume of assets they hold across accounts rather than per account, with a minimum of £48 per year. 

Other platforms still let you hold multiple accounts, including Isas from previous years, and multiple general investment accounts. Those include AJ Bell Youinvest, Fidelity Personal Investing and Hargreaves Lansdown. 

>Barclays says many of its customers will benefit from paying one fee instead of several different ones for different reasons

Many platforms also charge per account rather than per customer, including Hargreaves Lansdown, Charles Stanley Direct, IG, AJ Bell Youinvest and Alliance Trust Savings.

Barclays says many of its customers will benefit from paying one fee instead of several different ones for different accounts. For example, many of its customers may be paying annual fees for Isas, Sipps and general investment accounts with the broker, but from 28 August will pay just one fee for all of those, which could be lower.

Smart Investor customers will also no longer have access to their spouse's accounts or be able to give access to third parties with an authorisation letter. "We will still offer joint accounts but, because our system is now integrated with online banking, through the online banking portal, we are not able to allow people to access each other’s account for security reasons," explains Ms Frances.

But other platforms still allow you to appoint a third-party to access your account through a letter of authorisation. These include Charles Stanley Direct, Hargreaves Lansdown and Trustnet Direct.

Barclays will carry over Power of Attorney (POA), executor or court appointed third-party agreements, but this will become a telephone-only service.

It will not be possible to hold portfolios in trust with Smart Investor. At present Barclays Stockbrokers customers can manage shares and funds in bare trusts if they are the trustees. Trustees who want this capability could instead use platforms such as Interactive Investor.

Smart Investor customers will receive less information and fewer notifications about companies they invest in. Barclays says that company reports and accounts will still be available to view online, but customers will no longer receive these by email or letter. Barclays will also not save customer preferences on notification of particular company events, although investors will still have access to this information online.

Investors who want to receive information about companies, attend annual general meetings, (AGMs) and be notified of events could consider platforms such as Alliance Trust Savings. This runs a shareholder enfranchisement service whereby the company communicates directly with the investor as well as Alliance Trust Savings. Investors receive copies of annual and interim reports, notices of general meetings and information about proposed corporate actions such as bonus issues of shares, takeovers and mergers, and changes in the investment objectives of a fund.

 

Services other brokers provide that Barclays no longer offers 

Platform Range of investmentsCompany reports and accounts by email and letter?Notification of company events?Multiple accounts under one name?*   Charge per account or customer?Third party  accessAccounts held in trust
Hargreaves Lansdown Full range Yes, hard copies via letter on requestYes corporate actions but not AGM, can facilitate votes for clients YesAccount  YesYes
Charles Stanley DirectFull range Clients can hold CREST accounts and receive all communications from companies Yes, via CREST account YesAccountYesNo
Trustnet DirectFull range No - online only Yes, online only via news feed on portfolio NoCustomerYesNo
IG Over 9000 global shares, over 6000 ETFs, Investment TrustsNo - online only Yes, online only YesAccount YesYes
AJ Bell Youinvest Full range NoOnly corporate actions, not AGMsYesAccountYesYes
Alliance Trust SavingsFull range Yes, via shareholder Enfranchisement service, whereby company communicates directly with customer as well as nominee (your platform)YesYesAccount YesNo
Interactive Investor Full range Yes, post onlyCorporate actions yes, AGMs no, though customers can request attendance YesCustomer YesYes
Fidelity Personal InvestingFull range of funds and investment trusts, no shares n/an/aYesCustomerYesYes
BarclaysFull rangeNoAvailable online but no longer possible to save preferences and be notified of upcoming eventsNoCustomerNoNo

Source: Investors Chronicle survey 

*Excluding Isa restrictions