What's gone wrong with Barclays newly launched Smart Investor website?
FT Money Show presenter Claer Barrett and guests discuss the ongoing problems at Barclays new Smart Investor website, give financial tips for new university students and debate the benefits of active verses passive fund management.
Presented by Claer Barrett. Produced by Lucy Warwick-Ching. Edited by Paolo Pascual.
Has Barclays newly launched smart investor website been a dumb move? As the new university term approaches, how can today's students avoid a financial crisis? And are active funds the way forward when stock markets are going sideways?
Welcome to The Money Show, the FT's weekly podcast about personal finance and investing. I'm Claer Barrett, FT Money editor, bringing you this week's money news. Many users of Barclays' very popular stockbroking service have been smarting since the August bank holiday weekend, when around 200,000 customers were migrated to its new Smart Investor DIY investment platform.
However, many readers of FT Money and the Investors Chronicle, our sister publication, are unhappy about IT problems and other changes to the service. Joining me now to discuss are Kate Beioley and Emma Agyemang from the Investors Chronicles' personal finance team. Welcome, both.
So starting with you, Kate, tell us what's gone wrong with Smart Investor?
They're Barclays' stock brokers, obviously, one of the oldest stock brokers in the UK, so this week, overhauled its platform entirely. So it's migrated all of these customers over to its new platform. But for a start, it suffered some major teething issues-- teething issues, putting it lightly. Customers have not received logins, so couldn't access the site for a start. Those who could get in were shown blank accounts and error messages.
Customers with no Barclays current account being asked to enter logins for their current account. And there also have been some issues with inconsistent stock prices. In the end, Barclays' dealing with such a huge volume of calls at the start of the week that they had to close their online chats to deal with it.
So Barclays is working on all of those issues. But in fact, that would be bad enough. But in fact, people are already angry with this new platform, which they say is kind of alienating the traditional stockbroking base of customers who really did really like Barclays.
So there are a lot of things that you can't now do, which more sophisticated traders and maybe more frequent share traders really want to be able to do or really liked about the old site. So you can't trade certain shares, for example, US shares, some more complex product like covered warrants. You can no longer manage a spouse's accounts or third party accounts.
You can't see things like ISIN codes anymore, which are really important to people who are more frequent or enthusiastic share traders. So Barclays says that many of these things are still available in its research centre, but customers are saying it's much harder to find these things and they're having problems with it.
So for all those customers who, for example, hold things Barclays no longer supports, US shares, for example, they were given warnings that the new system wouldn't support this, and Barclays said they might like to transfer out. But in fact, there is now such a backlog in customers trying to leave that many people have actually had their accounts essentially frozen for long periods of time, in many cases. And they can't trade.
And people wanting to leave now are being quoted between six weeks and three months to move out of the service. And that's obviously a huge problem for people who are out of the market and worried about what's happening to their money in the meantime.
Well, indeed, and the stream of comments on the stories that the Investors Chronicle and those that you've helped the FT with are very revealing to read. People are talking about experiencing all of the problems that you've mentioned there. I was pleased to see that there was one wife who said she couldn't manage her husband's account. So it works both ways. But what explanation or, indeed, compensation has Barclays been offering to its disgruntled customers?
Well, so Barclays is saying that for a start, some of the things that customers are complaining about, it's saying, you know, it still exists on the site and it's just a different look and feel. And if they go into the research centre, they will be able to find some of the things that they want.
They're saying that for anyone locked out of accounts due to not receiving login details or maybe receiving the wrong ones, they're saying they're trying to get those sent out, new login details sent out as quickly as possible, first class post. They're saying that they're trying to deal with this backlog of transfer-outs, but it is obviously difficult. And they're saying that they're still aiming to complete these transfer-outs in the usual time frame. So it depends on what you hold, but maybe around four weeks for shares and two weeks for cash.
And in terms of compensation, nothing has been said about that. They're saying that they're just trying to deal with these issues and work through them.
Right, well, a moving story, clearly. But aside from the IT issues, many wealthier customers are actually very upset about the way the new platform charges are calculated. Can you shed some light on this?
Yeah, well, the ethos of this switch is to try and appeal, really, to a broader range of investors. So the more kind of traditional share investors are saying that this really does not benefit them because in the past, the charging structure was a flat fee of GB 36 a year to trade shares, and it was a percentage-based fee on your assets to trade funds.
But that has now changed. So all assets are charged on a percentage-based fee. And the minimum you'll be charged is GB 48 a year.
So for someone with a very large portfolio of shares, in the past, they would have been charged GB 36 to hold those. And now, they will be charged a significant amount more. So people are kind of up in arms about that, and it's particularly not beneficial or disadvantageous to those holding large portfolios of shares.
Sure. Can you give us an example of how much more it might cost?
Yeah, so for example, say you had a GB 50,000 portfolio, so you're lucky enough to have all of those investors holding shares, and you make 12 deals a year. So in the past, you would have paid a fixed annual fee of GB 36 for those assets, and you paid dealing fees of 11 pound 95 per trade. And that comes to a total cost of 179 pounds 40.
Now, under the new model, the Smart Investor, currently, they are offering a cap for Barclays customers to ease the transition. So Barclays customers will actually only be charged on GB 200,000 worth of assets. So at the moment, it's still more expensive.
You pay an annual fee of GB 200 plus a lower fee of GB 6 per deal. And it makes a total cost of GB 272. So that's almost GB 100 more expensive than under the old model. And after three years, when this offer expires, in fact, the cost of that portfolio would rise to GB 572.
Right, OK, so a significant difference. So Emma, turning to you, you've been focusing on how other retail DIY investment platforms are hoping to woo disgruntled Barclays customers. Give us a flavour of what they're offering.
Well, there are a number of platforms that offer the services that Barclays no longer does-- so for example, trading international shares. There's lots of different examples-- Hargreaves Lansdown, Charles Stanley Direct, TD Direct Investing, AJ Bell, IG, and Interactive Investor.
But to take a few in detail, AJ Bell and Interactive Investor charge around GB 10 plus 1% foreign exchange fee to trade international shares, while IG Markets has no foreign exchange fee, and it charges a minimum of $15 to trade US shares and a minimum of EUR 10 to trade European shares. So there are a number of options for investors who want to be able to trade international shares to consider.
In other areas, for example, complex investments such as covered warrants, there are also different options. A couple of examples are The Share Centre. It charges its standard fee of 7 pound 50 for deals valued at less than 750 pounds or 1% for deals of values over that amount. Meanwhile, low-cost broker [INAUDIBLE] charges just 5 pounds 95 to trade covered warrants.
And another area that-- as you know, you've mentioned the comments in the articles we've written. One of the comments that comes up a lot is that people have been very unhappy about their ability to manage a spouse's account that's been cut. But actually, there are loads of alternatives to this, and the majority of them don't charge any extra to use the service. Examples include AJ Bell, Alliance Trust Savings, Charles Stanley Direct, Hargreaves, Interactive Investor, IG, The Share Centre, and [? South ?] Trade. And that's not all of them. There's others as well.
Managing an account via power of attorney is another area that Barclays is now only allowing investors to do via telephone, but many people find it more easy to do online. And actually, again, the majority of platforms will allow you to do this for no extra cost.
And finally, the ability to manage an account via a bare trust arrangement. And that's something that actually is a little bit more patchy. Not all platforms offer it. But there are still a number that do. Examples include AJ Bell, Hargreaves Lansdown, IG Markets, and [? South ?] Trade.
Well, thank you very, very much for that, Emma and Kate from the Investors Chronicle. You can read all the latest developments on this story in the Money section of FT Weekend newspaper this Saturday. And to read Emma's piece about alternative platforms for investors who can no longer get the services they require from the new service, check out this week's issue of the Investor's Chronicle. It's available from all good news agents from Friday.
The new university term is about to begin, and families up and down the country are preparing to pack off their undergraduates. But how will they cope financially? And is the high cost of a degree really worth it? Joining me in the FT studio to discuss is Lindsay Cook, the FT's Money Mentor columnist.
Welcome, Lindsay. So student debt is a growing political issue. Today's graduates face average debts of well over GB 50,000 by the time they leave university. And the interest rates are going up all the time. How is this affecting young people's choices?
It's not having as big an effect as you might expect. The number of people applying for university this year was down about 4%. Quite a bit of that was down to people not applying for nursing courses because the bursaries are no longer there. And also, fewer people from outside the EU were applying because they're worried about--
I wonder why.
They don't know if they'll be able to stay, et cetera. People are concerned, parents probably more than the students, because, well, 75% of students or graduates don't pay back their fees because they're cancelled after 30 years. It's quite horrifying that you've got this in the background, and 75% of graduates don't earn enough to pay the money back.
Even more concerning is in the years you're at university, the day you start, as soon as you get your student loan, you start paying interest. And typically, over a three-year course, you've paid GB 5,700 worth of interest by the time you leave university. It then slows down unless you're earning a shed-load of money, but it does affect people, and it affects the way they decide what they're going to do.
There aren't enough two-year courses yet because there has been-- I've seen quite a bit of demand saying, where are they? Because we'd rather work harder and have shorter holidays, but very few universities are providing those yet.
Well, another structural change that you've written about in your piece is that more young people are choosing to stay at home and study at a university near their parents' house so that they don't have to pay the high cost of accommodation away from home.
Yes, well, if you go to London University, and you are paying-- the costs of living and accommodation, a majority of accommodation's now provided by companies, commercial companies rather than universities themselves. And typically, these cost in London more-- just the accommodation cost costs more than the GB 11,002 maximum you get for living in London away from home.
Which is unbelievable that that's more than that. And obviously, if you're a parent who's earning more than GB 60,000, then your child will be able to borrow less, another fact that you detail in the piece. So for many students, studying abroad could actually be something really worth investigating.
Absolutely. Students started to do this because there weren't enough places. They got straight As or A-stars, and they got fantastic academic records, but they couldn't still get a place, say, at medical school. So there are courses in Bulgaria, Romania, Germany, in English. They count as much-- if you learn there and come here to practise medicine, they count as much, particularly because if English is your first language.
In Germany, for example, there are no tuition fees. You may pay, for example, EUR 80 per semester administration charge. And one university I was looking at said that living costs were likely to be EUR 600 per term, which is way, way, way cheaper than here.
Mm, very interesting. Also, you'd have to raise money yourself to finance that. You couldn't get a UK student loan to finance a foreign degree. However, working during term time seems to be the norm for most UK students nowadays. What advice would you give those who are about to start a part-time job?
Look early. Quite often, the best jobs are at the student union, and everybody's after those. About 70% of students now try to get work. Now, they might do it in term time or in the holidays, but they're trying to get work. A lot go into retail because there's lots of weekend jobs and summer jobs in retail.
You will have tax deducted at source. You don't have to earn 11,500 to have tax deducted. You have to claim it back. If you want to get it before April, you have to download the P50 form from the HMRC. You pay national insurance over GB 157 a week earnings. I suppose it goes towards your eventual pension, but that's not much of a joy at this stage.
All work should be considered in terms of your long-term CV for getting a proper job. It shows you can apply yourself. It shows you can do jobs that are probably menial that you don't love. And if you can get a bump, if you move from being an ordinary fry server to a shift manager or something like that-- and lots of students do do this because they're bright and they're taken advantage of, probably. But that shows you've got application.
Well, thanks very much there to Lindsay Cook, the FT's Money Mentor. You can read her cover feature this week, "How Students Can Avoid a Financial Crisis," online from Friday at ft.com/money or in this FT Weekend's newspaper.
Finally, do sideways markets make more of a case for active fund management? Active managers who charge investors a premium for their stock-picking services have, in many cases, seen their performance trumped by cheaper passive funds that simply track the market. FT Money has covered both sides of this debate. And joining me now to discuss is Maike Currie, FT Money columnist and investment director at Fidelity, who is perhaps unsurprisingly fighting the corner of the active manager. Welcome, Maike.
So in your last two columns for us, you've made a strong case as to why investors should be cautious about abandoning active managers in favour of passive index tracking funds. Why is this?
Yes, I guess few of your listeners will feel very sorry for the active managers now that they've picked up the baton from the bankers as the next in line for regulatory scrutiny. And the arguments are really well rehearsed on both sides. Active managers come under fire for the fees they charge and for the fact that very few active managers actually manage to outperform the index. Passive funds, as we know, by their very nature, won't outperform the index once we take the fees off.
But the key thing that I'm looking at at the moment and that's quite interesting is this phenomena of a sideways market. And something we've seen over the past year, the market really is acting a bit like a crab. It's shuffling sideways. And a passive fund, by its very design, is not going to deliver any outperformance. It's going to attract that market going no where.
A good active manager-- and there are good active managers, especially in the UK where we've got stock-pickers like Nick Train of Lindsell Train; Dan Nickols of Old Mutual; Mark Slater, the late Jim Slater's son-- can find those winners. And in a time when investors are desperate for returns, because we know interest rates are at record lows-- and if the market continues this trend, it's not something new. Markets do go sideways from time to time. You really want to be with that stock-picker who can roll up their sleeves and find those elusive returns.
OK, so let's assume that markets do tread water for longer. What evidence is there that active managers or stock-pickers can deliver outperformance in this type of a market?
It's a good question, and it's a question a lot of your readers have asked me. There's a lot of research around. The most notable piece of research is from a chap called Robert Hagstrom. He looked at the zombie market from 1975 to 1982, and he tried to find stocks that outperformed within the S&P 500.
What he found was quite interesting. Over short-term periods, like one year, her found fewer stocks. Over the longer term, he found quite a notable amount of stocks that outperformed.
At Fidelity, our equity analyst team, under the steer of the brilliant Paris [INAUDIBLE] took that research a step further, and they looked at four markets. They looked at Japan, Asia, the US, and the UK. And they found something similar. Over the longer term, there are stocks that are able to double their return or, in this case, they delivered returns of 75%.
If you need more evidence, over that zombie market of 1975 to 1982, Warren Buffett, who's arguably the world's best known stock-picker, managed, on aggregate, to deliver 34% returns a year. So it is possible to deliver that type of outperformance.
And I think there's three things that we can conclude from this research, is one, over the long-term, the average matters less, even if that average is a market going no where. Second thing, good stock-pickers can deliver in flat markets. And the third thing, really, is that fund managers and stock-pickers need to invest in companies. They need to be in it for the long-term. They can't trade stocks.
OK, I'm tickled by the idea of Paris doing research into zombies. But what makes you believe that markets will continue to drift sideways?
Well, one word, really, quantitative easing. Quantitative easing has meant that over the last 10 years, it's been a good time to be a stock market investor, because that artificial stimulus from central banks has been the tide that has lifted all boats. That has been played out now. And the key thing is we really need a little bit of good inflation for stocks to grind higher.
And as central banks in the developed world, in the US, the UK, Europe will tell you, the one thing that's missing is inflation, that a good inflation that sees stock markets go higher. Now, I believe that's down to structural challenges that central banks can't do anything about. An ageing population with less money to spend; rising inequality; this rise in self-employment, freelancers, contractors, gig workers, delivery drivers, Uber drivers, earning less, less money to spend means prices aren't going to grind upwards.
As we always say, central banks can print money, but they can't print people. And if we have this tepid growth, we have low inflation, they're not going to turn off taps of monetary stimulus, but it's going to be less effective.
So what will we have? We'll have rates staying low. We'll have markets going nowhere. And there's some obvious winners and losers from this. The obvious winners, borrowers. The obvious losers, passive funds tracking a market that's going no where.
OK, well, thanks very much. That's Maike of Fidelity. You can read her column, "Fund Managers Need to Invest in Stocks, Not Just Trade," in this week's edition of FT Money or online now at ft.com/money. And please remember, the FT Money podcast is a general discussion about investment and isn't giving advice or promoting any particular products.
That's it from the FT Money Show. To get in touch with our team of financial experts, email us email@example.com, tweet us @FTMoney, or comment on our articles online at ft.com/money. We will be back next week at the usual time. Goodbye.