Charles Stanley Direct increases annual charges

Published by Holly Black on 13 August 2018.
Last updated on 13 August 2018

Is saving 11% of your income enough for retirement?

Fund supermarket increases annual charges from 0.25 to 0.35%.

Charles Stanley Direct is increasing its charges for investors. The fund supermarket, which had previously been among the cheapest providers for people to invest with, will hike its fees in September.

The firm will increase its lowest annual charge from 0.25% to 0.35%, with the price increase taking effect from 10 September.

It means customers with £10,000 invested will see their annual charges increase from £25 to £35. Those contributing £200 a month to an Isa will see their annual fee rise from £3.25 to £4.55, while the cost of a £30,000 Isa investment will jump from £93.83 to £113.93. 

Holly Mackay, managing director of Boring Money, says: "Charles Stanley Direct remains broadly competitive but moves to the middle of the back, losing its position as the platform which would always be among the lowest three on price for most portfolios."

Charles Stanley was previous one of a handful of investment platforms which charged just 0.25% to investors using its services. High-profile rival Hargreaves Lansdown charges 0.45%.

Charles Stanley will now be among the middle of the pack in terms of percentage-based charges, with a number of its peers offering cheaper services. Bestinvest, for example, charges investors 0.3% a year, AJ Bell Youinvest 0.25% and Halifax Share Dealing 0.18%.

Among the providers charging the same 0.35% fee that Charles Stanley will now impose are Fidelity Personal Investing and the Share Centre.

Percentage-based charging models account for around 84% of DIY investments managed online. The average annual fee across the 10 largest platforms is now 0.34%.

Mackay says the move by Charles Stanley Direct puts AJ Bell Youinvest in the spotlight as cheapest mainstream provider for smaller portfolios. It has a 0.25% administration fee and a dealing fee of £1.50 for funds.

The table below shows the wide variation in fees, depending on how much investors have to invest and which provider they choose, according to analysis by Boring Money.

Source: Boring Money, August 2018

Portfolio one indicates the outcome for someone investing £200 a month into an Isa. For these investors Charles Stanley may still be the cheapest option, with annual charges of just £4.55.

Portfolio two illustrates the fees someone might pay if they have a £30,000 Isa invested in a mix of funds and shares. Barclays Smart Investor comes out cheapest here, with an annual fee of £68.

Meanwhile, portfolio three shows the fees paid by an investor with a £30,000 Isa and £50,000 invested in a Sipp. Here, Interactive Investor (Moneywise's parent company) is the cheapest option with fees of £210 a year, closely followed by AJ Bell at £245.80. Flat fee arrangements tend to become progressively better value as portfolios become larger.

However, Ms McKay points out that investors should not just focus on the cheapest option when it comes to managing their money. "While there will always be those who want to pay the lowest available fee, most DIY investors make a value assessment, with service and convenience being weighed up against cost," she says.

Magnus Wheatley, managing director at Charles Stanley Direct, says: "Our industry faces increasingly complex and evolving changes – for more than five years we have striven to absorb these internally and have maintained an extremely low fee.

"In order to continue delivering a first-class service and invest in our website and app, we need to increase our charges. Analysis from Boring Money shows that our new charging structure is still very much towards the lower end of our competitors’ and indeed is better than a great many of our peers."

Moira O'Neill, head of personal finance at Interactive Investor, says: "Charges are a very important consideration for investors as even small differences in fees can add up to huge amounts over time due to the effects of compounding. Even a 0.5% difference in fees could mean the difference between a frugal and comfortable retirement. It pays to do your research and choose the platform that is best value for your circumstances."

Laura Suter, personal finance analyst at AJ Bell, adds: "We have no plans to increase our platform charge. We aim to make it as easy as possible for investors to manage their portfolios by providing a slick online service at great value."

This article first appeared on our sister website Money Observer.

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