So fortunately for me, someone on the FI London Facebook group highlighted that II had published the charges to accounts for previous TD Direct, now that the purchase has been completed.
I have to be honest, I had completely missed the update email stating that they were changing their charging structure – I had seen that they were going to, but missed the one that said they had. Given this, I thought I would share my thoughts and impact on this having read the terms and conditions – as I know it is always interesting to see what, why and how other people are changing their approach.
Please note: This is only taking their ISA product view – I don’t have a SIPP or Trading account with them (nor intend to) so is in isolation. Everybodies situation is different, so Do Your Own Research!
Current State of Play
Firstly – what do I hold? I have some Cash, Majority UK stocks & ETFs and <0.5% in funds over the entire portfolio. It’s not worth selling out my funds due to the dealing charge (or at least it hasnt in the past!). So I need to consider all of these factors in my numbers.
I don’t use the regular investment option within TD as to do so would have prevented me from using dividend reinvestment. So, my current charges are:
- £12.50 per trade. This however I take as a performance hit on the individual trade, so is simply added as an overhead, thus in effect increasing the overall price paid per share for my purchases
- £1.50 for dividend reinvestment. This is only on a few investment trusts so not a major factor, however again, this is included in my performance by taking the cost of this and spreading across the shares
- Platform Fee. This is very low as it is across the very small holding I have in funds, but is still a cost. The dividends the Fund pays out covers this, so I just treat this as a lower level of dividend payout
That’s it. So basically, if I didn’t trade (or traded once a year), and didn’t do dividend reinvestment my costs would pretty much be zero – a pretty sweet deal.
Looking back over the last few years, I have tried to work out what the total cost is to me against the portfolio.
The first thing that completely shocked me, is that despite believing I was a low volume trader, it appears that I may have been anything but as prudent as I thought I was.
In fact, in only 2 of the last 7 years have my total costs been below the new £90 cost – and that was the very first 2 years! Looking through the history to try and spot some trends, it leads me to this:
Dividend Reinvestment. Likely to continue, with SMT, NCYF always re-investing (6 per year), and so would JRS, JFJ, WPCT and Downing depending on what dividends they pay out – but I will go worst case and assume zero (i.e. deflate my costs). Anticipated cost is therefore £9.
I am also averaging almost 8 trades a year. Now, this is somewhat inflated due to 2013-2015, and the rebalancing I did earlier in the year. Assuming I purchase once per quarter, and add in a random purchase in between as well for balancing, that would give me 5 per year. Add in maybe 1 purchase per year for my “gambling”, that would give me a grand total of 6. Anticipated cost is therefore £60.
Sales. I am averaging approximately 2.5 sales per year. Whilst I am expecting the only things I will sell are going to be some of my gambles, I would imagine there would likely be 1 or 2 of these per year. For minimal cost, I will put this as 1. Anticipated cost is therefore £10.
So, based on that, the total cost of the new charges would be approximately £79. £11 down on the new charges they are bringing in. This is also based on a minimum trading. I can foresee selling BMS, PAF and potentially HGM at some point in the future, and buying other speculative shares, so I wouldn’t be surprised if I get close to the £90 anyway.
The New World
So, now they have published these wonderful new terms, what are they?
First – the big news is that they are introducing a quarterly charge – £22.50. Ouch. £90 per year. Just for having an account with them.
They state that this cost can be used towards the cost of trading, so you can accrue trades (handy if you rebalance on say a yearly basis). The caveat to that is that the maximum value you can accrue is £90 (i.e. one years subscription). The plus side is that they don’t expire.
I won’t look into the frequent trading rates as you need to have, on average, traded more than 10 times per month for the previous 3 months to qualify on this – excluding regular and dividend reinvestment. I can’t imagine anyone going for FI would trade quite that much (people who have made it may well if their portfolio is of that size!).
Regular trading rates have also changed. If you carry out sub £100k trades infrequently then quids in – they have reduced the rates from £12.50 to £10. If your trades are more than £100k then the bad news is they have gone up – granted only by £10 per trade (£30 -> £40 for £100k – £500k, and £60 -> £70 for >£500k). I doubt that will affect many people out there but still impacts on overall costs.
Dividend and Regular investments are reduced to £1 – so a win there for me too.
Transfer out is £10 per line item, with a minimum of £30, a maximum of £250 – however they have said that this will be waived in the first year, so it gives me some time to make my mind up!
So, what does this all mean to me, and should I move? Now there is an element of the lazy here that it would be a real pain in the a$$ so I won’t do it if it will only save me a few quid. More than about £25 and I will seriously consider it. More than £100 and I would probably action it!
They are introducing a transfer out cost, however it is free for the first year, which allows me to buy some time.
What it means?
So, where does that leave me? I will continue to dividend reinvest my my Investment Trusts – however if I have read the terms correctly I will now pay £1 per reinvestment however I do not believe that is included in the trade credits they offer me, so no change to current on that.
I am not doing any regular investments, so nothing to note there either.
That leaves my day to day trading…. which, until now, I thought I didn’t do a lot of. The data says otherwise. What do I expect to trade over the coming months? Well, I have some cash sitting around that is ready to deploy into some ITs, so that is at least 1 trade. I will have swathes of dividends coming in each quarter, which will mean at least 1 more trade per quarter. That takes me up to 5 over the next year already. I expect at some point I will sell or trade on some of the higher risk shares I have so I am going to be close to the £90 per year.
I have traded more than the annual charges for the last 5 years (including this year to date) – quite frankly this surprised me.
As I have a year where it is free to transfer out for now I am going to sit tight. The IT trade I was going to make this month I will now delay, so I will sit on my hands and trade nothing until after the new charges come in (caveat: if I see something at a value I can’t say no to, I will still buy it), and monitor just how much I trade, with an aim to reviewing in maybe August next year.
Do you have an account with TD? What are you planning to do with it? Do you really trade as little as you thought you did?