Fund manager Baillie Gifford has hammered another nail in the coffin of low-cost investment trust saving schemes by announcing the closure of its long-standing ISA, share and children’s savings plans.
Following the example of many of its rivals, the UK’s largest investment trust group has decided it is too expensive to run the schemes and will transfer the business to stock broker Hargreaves Lansdown instead.
More than 21,000 Baillie Gifford investors who hold £1.3 billion in the firm’s investment trusts, such as flagship Scottish Mortgage (SMT), will move to the Bristol-based broker.
There they will be able to access thousands of other investment trusts, funds and shares on Hargreaves’ Vantage platform, in contrast to the mere nine trusts in the Edinburgh-based partnership’s stable.
They will also be able to put their investments in a self-invested personal pension (Sipp), an option not offered by Baillie Gifford.
However, they will eventually pay for the privilege. While with Baillie Gifford investors paid an annual ISA fee of £32.50 and a sale charge of £22 per transaction, they incurred no other dealing or platform costs. There were no annual charges on the share or children’s plans, making those schemes virtually fee free (although there were annual management charges on the investment trusts).
By contrast, Hargreaves charges investors an annual platform fee of 0.45% of their money up to £250,000, although this is capped at £45 for investment trusts in an ISA and £200 in a self-invested pension (Sipp). There are also share-dealing fees every time they buy and sell a trust of up to £11.95 a trade, although transactions in funds are free.
To soften the blow Hargreaves has agreed to maintain Baillie Gifford’s charges for three years.
While the Baillie Gifford plans have been shut, existing investors will be able to add to their accounts during the transition period.
The decision leaves just Aberdeen Standard Investments and BMO Global Asset Management as the only two groups still operating savings schemes linked to their investment trusts.
Baillie Gifford claimed the transfer was in the ‘long-term interests’ of the plan-holders and that it had chosen Hargreaves on the ‘quality of service, cost, breadth of proposition, and experience of managing account transition’.
‘The increasing variety, capability, and cost-effectiveness of investment platforms in the wider savings market had led us to decide plan-holders of our investment trust savings scheme are best served by a specialist platform,’ said James Budden, director of retail marketing and distribution at Baillie Gifford.
There has been a trend for investment trust managers to transfer their savings plans to fund platforms such as Hargreaves and Alliance Trust Savings in recent years, choosing to forego the direct relationship with their customers in return for cutting administration costs.
In January Witan (WTAN) announced the closure of its Wisdom and Jump saving schemes and moved the business to Hargreaves. Last month, JP Morgan Asset Management transferred 53,000 investment trust savings plans clients, representing £1.5 billion, to Hargreaves Lansdown and The Share Centre, the former adding £765 million to its platform and the latter taking the rest. BlackRock and Jupiter have also previously outsourced their savings plans.
Nevertheless, the move is a surprise given Baillie Gifford has taken pride in offering value for money, in particular in relation to the low 0.37% annual ongoing charge on Scottish Mortgage, its popular £7.8 billion investment trust.
Last year the group launched an 'actual' investing marketing campaign espousing its belief in backing companies for the long term, a stance that sat well with its provision of low-cost savings schemes.
Aberdeen runs plans for its 16 investment trusts, including Edinburgh Dragon (EFM) and Murray International (MYI) with a minimum regular investment of £100 or a lump sum investment of £250. BMO operates schemes for its 13 trusts, including flagship F&C (FCIT) with a £50 minimum regular savings limit or a £500 lump sum investment.