Switching from US ETFs to UK investment trusts

Marc said:
According to the FRCL KID document the OCF is actually 1.2%
Click to expand...
It's not actually. That's a RIY figure and it includes transaction costs, which would not be included in a fund's TER. Apples and oranges.

In any event, US ETFs cannot be distributed to EU-based retail investors without a KID so this is all a bit academic.
 
Except that Professional investors are not required to provide a KID and therefore retail investors can still purchase US ETFs via a discretionary manager and therefore this is far from academic.
 
Important
As a consumer, you should always protect your rights and avoid dealing with unregulated anonymous sources which provide no protection in the form of regulation, professional indemnity insurance or verifiable experience and professional qualifications.
 
Marc said:
Example (min investment €100k)

Custody 0.11%pa
DFM 0.55% inc VAT
Dealing 0.25 with estimated turnover of 10% =0.05%pa

Total 0.71%
Click to expand...
So that's 0.81% in total, when you add in the ETF's TER.

In contrast, FRCL has a TER of 0.52%.
[broken link removed]

The UK doesn't have any withholding tax on dividends.
 
The UK doesn’t have any withholding tax on dividends.

Yet one of the largest holdings in FRCL is listed on the NYSE which does have DWT.

So FRCL receives dividends from the USA net of withholding tax and then pays a dividend to an Irish investor who receives no credit for the tax already deducted.

Contrast with the same stock held in a US ETF, same DWT but this time an Irish investor receives a tax credit for the US DWT paid

Assuming a gross yield of 2% and say 50% of a global portfolio in US equities (market cap weights) the DWT tax credit is worth 15 bps a year to an Irish investor

No stamp duty on purchase

Closing the gap...
 
Last edited:
Marc said:
Assuming a gross yield of 2% and say 50% of a global portfolio in US equities (market cap weights) the DWT tax credit is worth 15 bps a year to an Irish investor
Click to expand...
A DWT tax credit is worth nothing at all to an investor with a marginal tax rate of zero.

Regardless, it's nowhere near enough to make up for the DFM cost.

As a matter of curiosity, what would the DFM cost look like for an investment of less than €100k?
 
Thanks for taking the bait

Yes the amount makes no difference to the DFM fee
 
That's good to know Marc.

Still, I struggle to see why anybody would go that route ahead of investing in an IT such as FRCL given the additional costs.

Perhaps if the DFM fee was halved it might make sense.
 
Last edited:
Sarenco said:
A DWT tax credit is worth nothing at all to an investor with a marginal tax rate of zero.
Click to expand...

Si tacuisses, philosophus mansisses

In a pension (marginal tax rate of zero) if I invest in US equities via a Luxembourg based fund, I pay tax on the income at 30% if I invest via a Dublin based fund I pay tax at 15%.

The DWT credit is worth 15% and the marginal tax rate is zero.
 
Sarenco said:
Still, I struggle to see why anybody would go that route ahead of investing in an IT such as FRCL given the additional costs.
Click to expand...

The value of information has fallen through the floor but the value of actually getting things done, implemention, has gone through the roof.

As Buffett says, investing is like dieting. Simple, but not easy.

I may know how to lose weight but I will be more successful if I hire a personal trainer.
 
Last edited:
What is a a DFM fee? Has any one looked into ETFs in other domiciles such as Hong Kong?
 
Am I right in thinking that if one has a access to a cheap US bank account in your own name then US ETFs are more attractive.
 
Marc said:
In a pension (marginal tax rate of zero) if I invest in US equities via a Luxembourg based fund, I pay tax on the income at 30% if I invest via a Dublin based fund I pay tax at 15%.

The DWT credit is worth 15% and the marginal tax rate is zero.
Click to expand...
No Marc, it isn't.

You've just described the different effective withholding tax rates on US-sourced dividends under the DTAs between the U.S. and Ireland/Luxembourg respectively. Nothing to do with tax credits.

A tax credit is of no benefit to somebody whose income is below the relevant exemption threshold. For example, a couple with an annual income of less than €36,000, where one spouse is over 65.

In any event, in no circumstances is the benefit of a tax credit sufficient to make up for the DFM cost.

I appreciate you take the view that an investor is more likely to stick with a strategy if they have hired an advisor. Personally, I think that's self-serving nonsense but others may well take a different view.
 
My doctor has a coffee cup on her desk with

"Don't confuse your google search, with my professional medical training" written on it

But personally I think that's self-serving nonsense
 
The pilot of the last plane I flew in apparently has a "licence" but personally I think that's self-serving nonsense
 
Last edited:
Why would I need a licence to invest in a global equity fund?

The comparisons with medical doctors and airline pilots are just silly.
 
Has the penny dropped?

Why would you need a licence?
You don’t, that’s the point. Every single one of your comments is anonymous and lacks any consumer protection.

Why do I need a licence? Because I’m a regulated professional adviser carrying professional indemnity insurance.
 
You must log in or register to reply here.
Menu
Log in
Register