How to own The World (and how to move it)

globe-of-flags

I already told you guys how to own the world…you just buy something like the Vanguard Global All Cap Index Fund (VRXXB) via an online broker (also known as a platform).

Why a global equities tracker fund?

Because you then own shares in all the big companies in the world, you are diversified geographically and the whole global economic system is then working for you. Even while you sleep, those companies are working to build wealth for you.

Well that was easy.

Now we’ve got that out the way, I’m going to deal with a question that I often see on internet discussion forums from people new to investing .

And that’s this question:

How do I transfer my investments from one online broker / platform to another?

This is so easy that I’m almost embarrassed to write a post about it. In all honesty, I’m not sure there’s enough new material here for an article but, as critics of the Now That’s What I Call Financial Independence! series will know, that’s never stopped me in the past. So here goes…

Let’s start at the beginning.  You need a broker (or platform) to buy / sell / hold investments.  You need this for administrative convenience just like you need a online bank account to move / hold your money.

Online brokers offer the DIY investor:

  • The cheapest way to buy, sell and hold funds.
  • A wide choice of funds / shares / bonds
  • Tax sheltered accounts – stocks & shares ISAs and SIPPs.
  • The ability to invest on auto-pilot with regular drip-feeding and reinvestment of dividends.
  • Online portfolio tools to track your investments.
  • Easy access to your paperwork.
  • An execution-only service – you make your own decisions.

You can use this Monevator table to help you identify different platforms and to compare the costs. You’ll soon see that there are lots of different online brokers out there.

Some are better than others but, because those that operate in the UK are all regulated by the Financial Conduct Authority, they should all have a base level of competence.  For example, the FCA has in the past stopped struggling brokers from taking on new clients.  This is an area where Government regulation (mostly) works.

Having said that, I still researched my broker before entrusting them with the TEA Freedom Fund. I looked for a platform that had been in business for several years, had no debt, was profitable and had a founder and controlling shareholder that believed in widening access to share ownership for everyone.

I also chose a platform that is a public company for the transparency benefits that come from having external shareholders, analysts and a share price that should act as an “early warning siren” in the unlikely event of something going seriously wrong.

So I use The Share Centre as my main platform (they provide tax sheltered ISA and SIPP accounts as well as unsheltered accounts). And no, they don’t pay me to say that. I haven’t spoken to The Share Centre about this post and I’m not paid by them (as a customer I pay them ).

If you want to check them out, you can open a practice account. Its free and there’s no risk.  They give you £10,000 of monopoly money to play with so you can get used to what it feels like to “buy” a slice of the world economy via an index fund.

SC2

If you open a real account with real money then you should know that shares can go down as well as up. But then you already knew that, because this blog is for grown-ups.

So far, so good. But what if you are interested in moving your investments from one platform to another? Why might you transfer?

  1. Get a better platform (better customer service, better interface, safer)
  2. Get more choice
  3. Get lower fees
  4. Reduce your number of “pots” – reduced paperwork

These are all excellent reasons to transfer.

How do you transfer? All you have to do is fill out a form.  I know…ridiculously easy, right?

I have consolidated several pensions and ISAs and each time it has been relatively painless.  That’s because the transfer team at your new platform do this day-in, day-out and they should do all the heavy lifting for you. They deal with the obstructive bureaucrats staff at the platform you are leaving.  And no, you don’t have to ask permission from your financial adviser or your old platform to leave…it’s your money not theirs.

I know that there are horror stories anecdotes out there about transfers that took ages and these scare people worried about being out the market for a long time. But the fears are mostly overdone…especially where transfers are made by way of transfer in specie.

There are (usually) 2 ways that you can transfer your investments:

  1. Sale of investments by the old platform then moving the cash proceeds to the new platform for re-investment; or
  2. A transfer in specie where your investments move from the old platform to the new one without ever being sold.

You specify which of these on your transfer instruction form. So yes…you do have to be able to fill out a form.

follow-up

Not difficult at all…but its amazing how many people don’t get around to it.

As I may have mentioned before, to do this FI thing, you need to be the sort of person that follows through.  The world is full of ditherers and complainers but that’s not you. You are the sort of person that gets shit done.

You should be aware that many platforms charge an exit fee for moving investments out.

This should not stop you.  The Share Centre have always covered my exit fees. The new platform will want your business and so before you make your choice its worth asking them if they will refund any exit fees.

There are no doubt cheaper alternatives than The Share Centre out there but price is not everything. I look for value over price. I value the financial stability, customer service and ethics of a good platform.

I also insist on a fixed fee platform. I would rather pay a fixed fee of £80 a year than 0.15% of a portfolio of £53,333. The mathematicians amongst you will have figured out that both charging structures result in a fee of £80 per year.

But a fixed fee is much fairer.  The work that the platform does is not increased when your portfolio goes up in value so why should you pay more?…why should you be penalised for success?

Even if you currently have much less than £50,000 of assets, I still think its worth going with a fixed fee platform. That’s because if you are on The Path to financial independence, you will soon have more than £50,000 so you may as well start as you mean to go on.  Why not get into good habits ahead of time?

This % charging structure is one reason why I don’t use Vanguard’s own UK platform. A fixed fee broker will work out cheaper for anyone who is anywhere near FI levels of portfolio value. Also, Vanguard also doesn’t yet offer SIPPs (Self Invested Personal Pensions in the UK). And you can hold any Vanguard product in another platform.

Having spent >20 years running my own portfolio, there is one super-sneaky form of fee that people are paying without even realising it.  Whenever you do anything that involves foreign exchange (e.g. switching from $ to £ or €) your platform is probably taking a spread on the foreign exchange conversion.

Can’t see that cost on your paperwork? That’s because many brokers do this by adding a sneaky spread to the inter-bank FX rate.  Good luck finding the bit in their terms and conditions where it says that (its in there but you’d need to be a forensic accountant to find it and realise what it means).  The Share Centre do not charge any such spread on the FX rate.  Does your platform??

One of the questions that people have is what would happen to their investments if their broker went bust? (we already dealt with the question of what if Vanguard went bust here).

The simple answer is that client assets are protected by being held separate from the assets of the platform. If your platform owes Megabank money that it can’t pay back then your assets can’t be used to pay back Megabank or meet other creditor claims. So even if your platform goes spectacularly bust, you shouldn’t lose your assets.

And that’s true in almost all circumstances. Having said that, the recent case of Beaufort Securities (a broker that went bust) is worth mentioning. In the end, the principle of ring-fencing client assets was maintained. But there could have been circumstances where that would not have been the case.  If the insolvency practitioner fees had been very high, there was a risk to client money.

What are the lessons from the failure of Beaufort?

For you: Price is not everything. Have your money in a high quality platform with a robust financial structure (I found it re-assuring that The FCA approved The Share Centre as the platform to which the Beaufort customers got transferred). For the Government: keep an eye on insolvency practitioners and don’t allow an oligopoly to form.

What about investor compensation schemes? Personally I just act as if my share portfolio is not covered. I would split cash between different banks to benefit from deposit protection but to split a FIers investment portfolio into lots of small pots would be too painful for me from an admin perspective.

Ultimately, there are no guarantees in life and safety is an expensive illusion. Governments can change the law. Providers can go bust. Shit can and does happen. But this is no excuse not to save and invest. I’d rather be rich and subject to some risk than guaranteed to be poor in later life.

So I hope you will agree that moving platform is nothing to be scared of.

If you give clear instructions to your (old and new) platforms, they have to process the transfer without unreasonable delay.  If they fail to do so, you can call in a regulatory airstrike by making a formal complaint: first with the platform itself and then with The Financial Ombudsman.

You have the power here. You just have to realise that and then use it.


This is provided for information and is not regulated investment advice. The Escape Artist will not be handing out personal recommendations for Capricorns vs Sagitariuses vs Taurus’ etc etc.


fin-coaching-widget

Financial Coaching

 


 

9 comments

  1. Dickrog · · Reply

    another great post TEA, thank you.

  2. I note that some (RIT for example) have their sipps with two platforms as an insurance policy against one going bust but the extra cost puts me off and surely my etfs are mine not the platforms? I certainly hope so

  3. bellabeck · · Reply

    Hi, a few years ago When I last researched platforms with the help of Monevator table I opted for II as a fixed fee broker. Any thoughts on II?

  4. Claire · · Reply

    Very useful as I left my previous company and now I need to transfer my pension into a SIPP… my pension provider was charging 1% for a global tracker which is clearly not the cheapest. I guess I’m on my way to the monevator table then…unless someone here has some good advice for a SIPP provider?

  5. Do The Share Centre charge the (circa £7.50) fee when trading funds as well as individual shares? This would ultimately need to be factored into annual costs when pound-cost-averaging. Albeit this would probably still work out cheaper than a percentage fee broker that doesn’t charge fund dealing fees.

  6. donaldtramp1 · · Reply

    Yup I’m amazed at how many folk have pots of money in pensions all over the place from previous companies. I took a day and consolidated them all into the lowest charging SIPP provider(one of my old company pensions in fidelity) it’s not hard! I’ve been waiting with my pension pot for over a year (and counting) for Vanguards SIPP launch. There has been very little communication from them. I get the odd email (very rarely!) With an update. There is nothing in the news either. Anyone know whats happening?

  7. […] TEA on buying and moving tracker investments (24) […]

  8. ladyaurora · · Reply

    Mmmm. Great post but left me feeling uneasy about my platform . Almost wanting to follow TEA to his platform 🤔. But I think TEA has more individual shares in his portfolio which are more vulnerable held in a platform account as opposed to ETFs.

    1. Bill in Beds · · Reply

      Another great post. You got me interested in looking at the Share Centre for a SIPP to hold Vanguard funds. The £80 annual fixed fee is great for accumulation compared to other platforms. I’m looking at entering drawdown though and their drawdown charges look a bit eye watering at around £200 +VAT annually and some other fees. Always swings and roundabouts with these charges! Vanguard annual platform fee of 0.15% is capped at £375 across all account types. So if they ever did a SIPP it will be interesting to see how their charges work with that cap and for drawdown. It does seem odd that Vanguard have the percentage charging model on their platform rather than just a fixed cost when they claim to be low cost.

Leave a Reply to Bill in Beds Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: