Things to consider

Charles Stanley Direct Proposition Review

The Charles Stanley basic package is good value, care needs to be taken where investors are considering adding a pension or even making regular investments into shares or investment trusts.

We have considered two propositions (Hargreaves Lansdown and Interactive Investor), the third proposition is one that is newer but gaining traction in the market. Launched in 2013 ‘Charles Stanley’ is an interesting operation and includes some of the team from Hargreaves Lansdown. They are a listed company and are one of the leading stockbroking and investment management companies in the UK.

Our research shows the position they occupy is somewhere between Hargreaves Lansdown and Interactive Investor. Where Interactive Investor feels a little like a kit car, this feels more pre-packaged and tries to provide investors with the same user experience as Hargreaves.

Recent research shows 44% of people look to invest via a well-known and trustworthy brand. Hargreaves has successfully used PR as a means to promote their proposition. Interactive Investment doesn’t but Charles Stanley is becoming active in the media, possible due to the connection with some of the team to Hargreaves Lansdown.

Bundled v unbundled – what does this mean?

A bundled fund has one annual charge, say 1.5% p.a. It is collected by a fund manager but then this is split so part of the payment goes Charles Stanley and part is retained by the investment house.

Charles Stanley had an advantage as a late entrant to the party which meant they came in with clean funds. They have never offered bundled funds to investors under the direct proposition, so investors can see exactly what they are paying when they select a fund.

If we compare to Hargreaves Lansdown and Interactive Investor the picture, is a little more complex. Hargreaves Lansdown clients can switch across to the clean funds but can retain the old bundled funds and have the rebates paid back to their account. With Interactive Investor they only offer bundled funds but fully rebate back the payment to the client.

Having a clean share class is a lot easier for the client going forward.

What are the charges?

The charges are very clear and sit somewhere between the levels charged by Hargreaves Lansdown and Interactive Investor. We will cover the pension wrapper separately.

The charges are 0.25% on the first £500,000 of funds across all accounts and 0.15% per annum on balance of funds in excess of £500,000. If we take the average Hargreaves Lansdown investor with £40,000 the charge would be £180 p.a., with Interactive Investor £80 p.a. and with Charles Stanley £100 p.a.

On paper Interactive Investor seems cheaper but as we have indicated, this depends on client activity so if they trade more, Interactive Investor may end up more expensive. There are also additional points that need to be considered with Charles Stanley.

  1. Hargreaves Lansdown charges per account, per client; Interactive Investor combines the charge for spouses and accounts and Charles Stanley charges across all accounts (but not spouses). For example, with Charles Stanley if a husband and wife have £300,000 each they would not qualify for a charges discount on balances over £500,000
  2. If investors are paying regular contributions into investment trusts or shares there is a trading charge of £10 per trade; therefore this platform may not be the best place to go. To compare, both Hargreaves Lansdown and Interactive Investor charge £1.50 for regular trades into shares and investment trusts
  3. 0.25% p.a. is charged on funds, and shares (which include investment trusts), however there is a minimum charge of £20 and maximum charge of £150. If a client has less than £8,000 in shares or investment trusts then the £20 charge equals a higher percentage than 0.25%. The breakeven point is around £8,000. However, if the client makes more than six transactions a year the annual charge on all share holdings is waived
  4. Where Hargreaves Lansdown has a maximum charge of £200 for pension and £45 for ISA per account for holding shares, Charles Stanley charges £150 for all accounts held by an individual. As an example, if a client had £300,000 spread £100,000 in an ISA and £200,000 in a Pension Hargreaves Lansdown would charge £245, whereas Charles Stanley will charge £150
  5. In addition there is a charge of £10 per trade on investment trusts and shares. This is similar to Hargreaves Lansdown and Interactive Investor.

This is best described as follows:

  1. Husband and wife have an ISA of £10,000 each and pay regular contributions of £100.00 per month into four funds each
  2. The total charge is £50 p.a. There are no charges for the trades into the funds
  3. As a comparison Interactive Investor would cost £152 a year and Hargreaves Lansdown £90

For a straight forward investment fund ISA Charles Stanley have a very cheap pricing structure. If the clients had 50% of the money in shares but still paid into funds the charge would be £65 p.a. It remains cheaper but investors need to be aware that the cost goes up when they use more complex types of investments.

Is there anything else you should know?

If the clients set up a pension with Charles Stanley in addition they charge £120 p.a. (including VAT) per client.
To compare Interactive Investor charge is £144 (including VAT) and Hargreaves Lansdown charge 0.45% p.a.

Using the same example, with all the investments in funds, and each client holding £20,000 and making regular premiums the charge for Charles Stanley would be £420 p.a.

Interactive Investor would charge £432 p.a. and Hargreaves Lansdown £180 p.a.

For lower values Hargreaves Lansdown have a cost advantage over Charles Stanley.

Fees

It is unclear how charges are taken but the assumption is that these are taken from the cash account and therefore the client will need to ensure there is sufficient cash to cover the charges. There is no indication that clients will be charged if there is insufficient cash.

Can you move?

Yes but if an investor wants to keep their existing holdings (an in-specie transfer) Charles Stanley charge £10 per line of stock irrespective of the type of account. Hargreaves Lansdown charge £25 and Interactive Investor £15 so certainly this comes in slightly cheaper.

There is also a charge of £150 (including VAT) to move the pension away. Interactive Investor charge £120 and Hargreaves Lansdown has no charge.

Does Charles Stanley offer good value?

For ISA and Investment Accounts with regular contributions the 0.25% charge makes it an attractive proposition especially against the Hargreaves charge of 0.45%. Interactive Investor is more difficult to judge because of the trading charges on funds.

Charles Stanley’s SIPP Charge does make it considerably more expensive at £120 plus 0.25%. At around £60,000 the charge is around 0.45% which is equivalent to Hargreaves Lansdown and then starts to get cheaper. So below this value it is expensive compared to Hargreaves Lansdown.

Against Interactive Investor and assuming no regular contributions they would be cheaper at values below £10,000 but above that they are expensive. Interactive Investor comes in cheaper for a single investor with a value around £30,000 to £35,000 when compared to Hargreaves Lansdown.

The Charles Stanley basic package is good value, care needs to be taken where investors are considering adding a pension or even making regular investments into shares or investment trusts. Also care is needed when a spouses fund is also set up as this changes cost significantly for the investors.

So where now

An advantage this platform has over its rivals is youth. This is a new proposition, whereas with mature platforms they can have significant issues reconciling old technologies and charging structures.

Although we can highlight different prices, there are so many factors that investors need to consider. The focus on price is not necessarily the only part of the equation. The question is what do you want from a platform, how can it be achieved and who has the tools to deliver it.

Looked at in this way, Charles Stanley is a cheaper option in places and they provide a number of tools to help investors, investors just need to make sure they are the ones they value!

 

 

NOTE: This is written in a personal capacity and reflects the view of the author.  The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.

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