Transfer Blues

This is going to be a bit of a rant ...

On Feb 19th 2014 Interactive Investor sent me a secure message saying that they had received my ISA transfer application form and would start things moving, but that I should be aware that the process could take up to 8 weeks.

Yesterday (26 weeks down the line) I had another message from them saying that they were still waiting for RLUM/CIS to re-register my funds with them in order to complete the transfer process. They expect that this will take another 2-3 weeks.

The time between these two messages has been interspersed with several messages/calls from myself querying the hold up which eventually uncovered the facts that:

1) They were holding the wrong address for RLUM/CIS. That is, they were holding the RLUM address in London (my fault, I wrongly believed that since RLUM had taken over CIS that was where correspondence should go) insted of the CIS address in Manchester. I corrected this for them by sending in another transfer form with the right details.

2) When it came to sending back the acceptance letter to CIS II didn't use this updated address but sent the letter back to the wrong address. They didn't chase when they didn't receive a reply.

3) At no point did any of the hold-ups on my transfer process alert II to make further enquiries/look at my paperwork/wonder why they still have a transfer that hasn't completed after more than 6 months. I have had to chase all the way.

I was aware that I was transferring at a time when we are continually been told that S&S ISA transfers are taking a long time due to volume so we have to be patient. I have been patient but am beginning to wish I hadn't. If I'd shouted a bit more they might have looked a little closer at what was going wrong.

The whole process is not transparent and no updates on progress are forthcoming but from what I have pieced together it seems that this is the order of proceedings:

• Customer sends transfer request to new platform
• New platform asks old platform/fund manager for valuation (via postal system)
• Old platform prepares and sends valuation (via postal system)
• New platform receives valuation and sends acceptance letter to old platform/fund manager
• Old platform re-registers fund.
• Fund appears on new platform.

Repeat for each fund in ISA

If the process stalls at any stage (at least in the case of II at this point in time) things grind to a complete standstill until the customer starts jumping up and down.  

In the meantime II have credited me with the commission credit and cash due as part of their transfer offer, which sounds good but which isn't actually quite so good as I can't use it until I have my CIS funds to sell as part of the re-balancing I'm planning. Unused commission credit is lost at the end of each quarter. The frustration grows. However, I was assured during (yet another) phone call yesterday that they will ensure that I do not lose out due to the delay, and will ensure that I can carry the credit forward. I intend to ask for this assurance in writing.

I know that my experience with II is not at all unusual (my husband's transfer has still not completed after 16 weeks and there are numerous posts on MSE complaining about the same issues), but at the end of the day I am not sorry that I started the transfer process, nor that I chose Interactive Investor. They are going to save me a hell of a lot of money, the online interface does the job, phones are answered promptly and messages replied to in a fairly timely manner but they do need to look at the systems/workflow behind their transfer process. It is absolutely not fit for purpose.

Back in April 2014 I read an article in Investors Chronicle which said that fast transfer for S&S ISAs was already possible but that it hadn't been implemented by many brokers due to the fact that their systems couldn't talk to each other. If the technology is in place I'm sure things will get better in the future, just as I am sure that at some point my funds will magically appear. But it will all be too late to change the fact that this experience hasn't done anything to help my already dodgy blood pressure.

Deep breaths ...

In Anticipation .....

I received a secure message from Interactive Investor 10 days ago telling me that my ISA transfer would be showing in my account in 3 days time. Despite several phone calls my funds still haven't arrived, although I am assured that this is just due to a backlog and they will be with me very shortly.

I know (from reading the numerous posts on the subject on moneysavingexpert.com) that all the platforms are struggling with the volume of transfers at the moment. II is one of the better value flat rate services and so I appreciate that it is probably struggling more than most. I am (and I have been) prepared to wait but it is quite disconcerting to get an automated mail saying that your transfer is finalised, hold onto your hat, you'll be able to trade very soon, and then..... nothing.

However, in the meantime, I thought I should some concrete plans about what I'm actually going to do when the magic moment finally arrives.

My transfer will consist mainly of the CIS UK Growth Fund (around £40,000 on a good day) and a tiny bit of the CIS US Equities Fund (£70 - somehow a bit got left behind when I sold most of it a few years ago).

Due to the UK fund being by far my biggest holding my portfolio is very top-heavy in UK equities and I know that I need to rebalance. However I do need to watch out for dealing charges. Interactive Investor charge £10 per buy/sell but I will be credited with a total of £50 credit plus £20 cash when the transfer completes due to the quarterly credit plus transfer offer. So I will have £70 to spend over the next 3 months which also needs to cover 3 lots of monthly investments at £1.50 per line.

My first priority is to sell a good chunk of the CIS UK fund - I'm was thinking that I would sell £10,000 and redistribute it into my trackers as a start. So something like £3,000 into BlackRock Emerging Markets, £3,000 into HSBC FTSE 250 and £4,000 into HSBC European Tracker. Well at least this was my intention until I saw this:

(Telegraph 26 Oct 2013 - Dan Hyde) 

This article has made me question my plans because it seems that (if the analysis is to be trusted) the areas in which I have already bought trackers are actually the areas where, if I'm going to use active funds at all, I should be using them. It seems that somehow I may have got it completely the wrong way round. Until you look at the effect of the fees of course :-)

One thing I can be clear on is that I do need to put a fair bit of money into the US as I have very little exposure to the US markets at the moment (around 4%). But this is such an expensive area as the S&P is soaring. I would be buying very high.

Perhaps a global tracker would be a better idea that a US specific fund at this point in time (I do also have an ex-UK tracker in my AVC fund). In this way I cover both the US and Europe and can beef up either/both when the markets fall a little. So I've decided to make the following buys:

• Vanguard Developed World ex-UK tracker - £5,000

I'm inclined to continue to cover Emerging markets with a mixture of active and passive

• BlackRock EM CIF - £1500
• Aberdeen Asian Smaller Companies - £1000

Europe is a bit of a biggie as I have very little invested here and according to the chart this is the one area where low cost active management (if you can find it) can really pay off. So my fourth buy will be a European investment trust (possibly property based) although I haven't done enough research to know which one as yet.

• European IT (tbc) - £1500.

This leaves me with £1000 to add to my regular £500 contribution this month and I so will invest £300 in each of the following:

Herald IT
Fundsmith
Ishares Clean Energy
HSBC 250 Index
BG Shin Nippon

Total dealing charges: £56.50. This means that I will have £13.50 credit remaining for the rest of the quarter - I'm happy with that.

This is the plan. I just need to wait for my transfer to complete and then I can get on with it!

Buying Clean (Part 2)

There has been a lot of discussion about "buying clean" in the investing world recently, and it's not been about solar power and wind farms.

If I understand it correctly the whole charging system has been given an overhaul in order to ensure that customers can be totally clear about what they are paying, and what for. Previously fund managers, brokers and fund supermarkets were allowed to "bundle" charges which meant the various components of the fee could not be pulled apart and seen individually (better explanation here). 

In practice this has meant that, during the transition phase, many funds now have more than one "class", one clean and one. The dirty ones are gradually being phased out. 

In practice this has only affected me in a minor way as iii will deal with transferring over my funds into the clean class for me where necessary (thank goodness) but it has meant that I have had to delete two of my regular investments (Fundsmith Equity and BlackRock CIF Emerging Markets tracker) and add them in again as the "clean" version.

The process may only have caused a minor headache as far as managing my investments goes, but it has made me realise that although I do take notice of charges (I chose my trackers partly they are very low cost and I know that this is why passive funds often end up beating actively managed funds in the long term), I have never actually documented the charges I pay. 

So, this seems a good place (and time) to do so:

Baille Gifford Shin Nippon - Investment Trust, Dealing Charges Only

iShares S&P Global Clean Energy - Exchange Traded Fund, Dealing Charges Only

Herald Investment - Investment Trust, Dealing Charges Only

BlackRock CIF Emerging Markets Tracker (D) - 0.20%

FundSmith Equity - 0.9% (0.15% rebate) - 0.75%

HSBC European Index - 0.25% (0.10% rebate) - 0.15%

HSBC FTSE 250 Tracker - 0.25% (0.10% rebate) - 0.15%

Charges Before the Transfer

The charges we have been paying on our CIS Funds (paid directly to the fund manager) are:

CIS Sustainable Diversified 1.55%
CIS UK Growth 1.50%
CIS UK Income with Growth 1.54%
CIS US Growth 1.56%

(I don't even want to think about the 5% initial charges we paid on all these )

Once they are transferred to ii they will be discounted to:

CIS Sustainable Diversified 0.70%
CIS UK Growth 0.70%
CIS UK Income with Growth 0.70%
CIS US Growth 0.70%

This amounts to a saving of around 0.85% on the CIS funds.

In addition ii charges £20 per quarter platform fee, which includes 2 free trades per quarter. As part of my transfer offer (which hasn't completed yet) I will also get £20 cash and £120 dealing credit. Transferring my husbands ISA over into ii as well means that the two accounts can be linked and we only pay one set of fees. All-in-all a very good deal. £80 a year for two ISAs. As we have £54,000 between us this amounts to somewhere around 0.15% to add into the charges above. Which means that overall, when all charges are taken into account, we will be saving 0.70% by moving to iii.

At our current level of investment this comes to around £380 pa. 
(even without taking the transfer offer into account)

Having just sat down and worked this all out properly for the first time I'm pretty amazed at how much difference the combination of being careful to pick low cost funds and finding the right platform can make.
Being aware of charges and making positive steps to reduce them is key. Clean charging plays an important part in helping us do just that.

Getting Onto the Platform

I first took out a S&S ISA around 8 years ago with CIS (now managed by Royal London). I paid into it monthly and took very little notice of how it was doing, basically because I truly believed that it was little more than a glorified savings account which would just increase somewhere in line with the amount I put in. I had heard the term "volatility" but I had never really bothered to find out what it meant.

When I started thinking about retirement planning I took another look at my ISA as this is the biggest "chunk" of money that I have available to help me. Whilst doing my research on what a S&S ISA actually is (which naturally led onto a crash course in portfolio building and asset allocation courtesy of Tim Hale amongst others), I came to realise that there was a whole new world out there. This world was one where people could manage their own investments online, where they could see how those investments were doing on a day-to-day basis if they wanted to, where they could research what was available, create imaginary portfolios and "watch" interesting funds. In other words I discovered the online broker platform.

From believing that I had to leave my money where it was and passively watch what happened to it via an annual statement that came through the post, I went to realising that I could move it onto a platform and be actively involved in managing it. It was a liberating discovery as it fed my desire for control and need to plan, but it was also a little scary. How should I go about moving all that money, and where should I put it?

As I'd been reading Monevator for some time this article was my main information point in my planning, (although I did read the boards at moneysavingexpert.com and anything else I came across about the subject). Given my profile Interactive Investor turned out to be the fairly obvious choice and as they were offering an attractive transfer deal at the time (and still are, I believe) I decided to bite the bullet and start the ball rolling.

I filled in the transfer form, set up an ISA account and began to familiarise myself with how things worked. I must admit that the first time I bought a fund I felt quite nervous and, in fact, my 5 first buys were fairly small ones as I wanted to see the whole process run through but without committing much cash. For that reason I know I paid more dealing costs than I should have (iii charge £10 per deal) because I hadn't yet (and still haven't) been credited with any of the free dealing that was promised as part of the transfer deal. Thus I committed one of the cardinal sins of investing - paying over the odds to deal. But I'm happy to take this hit as I think it's worth it to get myself up and running with confidence. Plus I now know that I've been paying more charges than I have needed to for years, so, in the long run I will be saving quite a bit of money.

I'm now at the point where I feel that things are going pretty well. I have 5 funds with small amounts sitting in them, I've organised a monthly payment into my account from my current account and the first set of regular transactions I set up went through (almost) without a hitch. I feel pretty pleased with myself and all ready for the next financial year.

If only whoever is sorting out my transfer would get a move on and shift things across ..