Interactive investor fee changes

Tuesday, Apr 09 2019 by
3


https://www.ii.co.uk/blog/interactive-investor-adopts-netflix-monthly-flat-fee-pricing-model-ii508049

This will be more expensive for those who trade infrequently, which is unfortunate as all the evidence suggests that frequent trading produces lower returns.

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16 Posts on this Thread show/hide all

herbie47 9th Apr 1 of 16

"all the evidence suggests that frequent trading produces lower returns."

Does it? Minervini is a frequent trader and currently one of the most successful.

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jonesj 9th Apr 2 of 16

Thank you for flagging that.
I trade infrequently & the previous annual fee was cancelled out by trades across both accounts.
Under the new structure, it will cost me £30 more per year. Due to lack of mobility in the market, I cannot move for this sum.

ii have not mentioned their forex charges. So whilst US dealing costs fall from £10 to £8.99, the forex charge presumably remains at 1.5%. Therefore £150 on a £10k trade. To fail to mention the largest component of overseas dealing costs is somewhat disingenuous. Also, this is arguably price gouging, since we can all change money for less than 0.5% elsewhere.

The worst fee increases I have seen are at AJ Bell, where the annual SIPP fee I pay went from 0 to £100 (stocks), but would be up to £300 if I had a a mix of stocks & unit trusts. With no free trades.

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timarr 9th Apr 3 of 16
12

In reply to post #467361

Does it? Minervini is a frequent trader and currently one of the most successful.

How do you know? 

In any case, this is about the average investor, not the outliers. One person isn't evidence, they're just a data point.

Here's the output from Barber and Odean's research into the effects of the frequency of trading on returns. It's based on 66,000 investors.

5cac67765f94a9366-figure-1.jpg


http://faculty.haas.berkeley.e...

timarr
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dodge1664 9th Apr 4 of 16
1

In reply to post #467361

A subject for another thread, I think. I don't know who Minervini is, but the record of one individual is of doubtful significance.

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carmensfella 9th Apr 5 of 16

Come and talk to the company. Interactive Investor will be appearing on at least one of the panel sessions at our #Mello Trusts and Funds event in London on the 15th May https://melloevents.com/trusts-funds/ Great speakers & panels plus 30 Investment Trusts & Funds. Put VIP10 in the discount box & tickets cost just £10

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herbie47 9th Apr 6 of 16
1

In reply to post #467376

Yes forex fee is 1.5% which is too high, (HL 1%) also their foreign excluding US fee is £19.99 which again is too high. I may do an ISA with them for UK shares, will save about £200 over HL.

I hope this will bring charges down at other brokers, compared to the US, UK charges are really high, you can easily trade in US for $5 a deal.

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herbie47 9th Apr 7 of 16

In reply to post #467391

Well I was responding to "all the evidence suggests that frequent trading produces lower returns."

There does seem to be some evidence that Minervini is successful. He has said he does 200-400 trades per year.

That study was about 20 years ago? I thinking trading has changed considerably in that time.

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dodge1664 9th Apr 8 of 16

In reply to post #467416

I agree that the forex fee is too high, but I'm not aware of another platform aimed at retail investors that offers a multicurrency account and trading in markets outside the UK. I think you might be able to avoid the forex fee if you have a multicurrency bank account in your own name so that you can make transfers and withdrawals without actually converting at all. Then again there will probably be fees and a minimum balance for the bank account...

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herbie47 9th Apr 9 of 16

In reply to post #467436

Well HL have a 1% forex fee, it was 1.5% but was reduced last year.

If you are doing a lot of US trading and don't want/need an ISA then Charles Schwab charge $4.95 transaction fee, you need to deposit money in US$s, they have an office in London. I believe there are some UK brokers that do have US$ trading account, so you don't pay a forex fee.

Fees reducing is a good thing, although II will not suit everyone. I'm tempted to open an ISA with them to see how it compares to HL.

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HumourMe 9th Apr 10 of 16

In reply to post #467436

I agree that the forex fee is too high, but I'm not aware of another platform aimed at retail investors that offers a multicurrency account and trading in markets outside the UK. 

Interactive Brokers and Saxo Bank offer this. I'm sure others do too. Finding a UK broker, aimed at retail, who pushes technology and capability forwards, is I think more challenging. 

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timarr 9th Apr 11 of 16
2

In reply to post #467431

There does seem to be some evidence that Minervini is successful. He has said he does 200-400 trades per year.

Self-reported? Or is that based on a proper peer-reviewed analysis of the data? I certainly can't find anything.

But even if true it's not evidence, any more than Warren Buffett's record "proves" that value based LTBH investing works. That just proves that Buffett's an exceptional investor. You can't use outliers to disprove evidence based statistical analysis. And the evidence backs up the original assertion: "frequent trading produces lower returns".

The Barber and Odean study may be 20 years old, but all of the studies since continue to back it up. This paper gives a useful summary of the evidence:

https://www.nber.org/papers/w2...

Basically it's nothing to do with how trading has changed in the intervening years; human psychology remains the same. Generally, people are way too overconfident about their ability to pick winners and losers. Which is why the evidence and data based analysis provided by Stockopedia is important - even though people keep trying to introduce factors based on their personal experience that there's no evidence for ... :)

timarr

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intuitive6191 9th Apr 12 of 16

Annoying. As always these price increases are spun as some benefit to the customer. I will be transferring as I don’t like this practice.

I also use Iweb. Is anyone aware of any bad news in the pipeline here?

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donald pond 9th Apr 13 of 16
1

On the Minervini subject he did win the US Investor of the Year prize 2 years running and it is an open competition where all trades are above board. But he is an outlier. The other issue is that he trades in the US, where markets are much more liquid and spreads tend to be much thinner, particularly in the small cap/high growth area.
I personally feel that the UK markets, and AIM in particular, are becoming ridiculous. If you cannot reliably buy or sell stock worth £10k, or if the spread is above 2/3%, I do not feel that a company should be listed. AIM and the LSE should imo introduce minimum liquidity and spread requirements and if a company cannot get 3-4 brokers to agree to make a market on that basis, the company should not be able to access the public markets.

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jonesj 9th Apr 14 of 16

In reply to post #467496

intuitive6191

I also use iWeb and am not aware of any impending price increases.
Having had a basic account there for well over 10 years, the only price increases I recall were increasing the forex charge from 0.5% to 1.5 %. [I believe it went up to 2% at one point]

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herbie47 9th Apr 15 of 16

In reply to post #467466

I'm not disagreeing with you, on average high frequent traders don't outperform the less frequent traders. But there are reports that over 90% don't beat the index or even lose money, one report said it could as high as 99%, one reason is most try it for a while (get rich quick) and then give up. But I think there is a difference between daytraders and what I would call frequent traders. Warren Buffet said investors should buy low cost trackers. So I think investors who beat the index are exceptional they are not average.

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sharmvr 9th Apr 16 of 16

Not sure it was a good idea to bring these changes after they removed exit fees - not because this is a material change, but generally people don't like change and will probably react before analysing.

I expect they refer to HL as their largest competitor.
Firstly, I think HL are worth the fees - I have spent more time on hold with II in the 12 months I have had an account then 8 years with HL.
Secondly, it is not a fair comparison - the platform fee HL charge only applies to funds, for ISA and SIPP there are caps in place for ETFs / trusts / shares, and those holding fees don't apply to non wrapped accounts.

Also, before the quarterly fee was offset against trading fees, so for me, where I used II for regular investment in ETFs under monthly investment plan, the quarterly fee covered all trading activity, whereas, now it would only cover a single trade.
Either way, HL will be more expensive and quite rightly IMHO

Of course, if II really wanted to run a charity with these changes, I would suggest they would have retained the original pricing structure as an option for customers who preferred that.

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