Moving your investments from L&G to Fidelity. Is it a good idea?

I had an email from a regular reader recently asking me whether he should keep his ISA with Fidelity now that it has been moved from L&G. This is what he said:

“Last year Legal and General ISAs were moved to Fidelity. I had a dormant ISA with L&G, and I didn’t respond one way or the other to the change so by default have an ISA with Fidelity. They are currently offering a cash incentive to move other ISAs to them. Are you aware of this, and if so do you have any insight into Fidelity as an organisation?”

In October 2020 Legal & General announced that they had sold their whole investment business to Fidelity, which means that if you had an ISA or similar with them you’ll now find yourself – like it or not – with Fidelity.

So is this good or not and is the cash incentive worth taking?

• Why did L&G sell its business to Fidelity?
• What does this mean for your investments?
• Is Fidelity a good place to leave your investments?
• If you don’t like it, what should you do?

Why did L&G sell its business to Fidelity?

IN October 2020, L&G sold its ISA accounts with around 300,000 customers comprising around £5.8bn of AUM (Assets Under Managment) including basic ISAs, Junior ISAs and General Investment account products that were invested in LGIM funds.

It seemed like a surprise move at the time for L&G to sell its ISA business to a competitor, but Elizabeth Bickham from L&G explains “at the time, when asked, we conformed that for LGIM this particular book of business was no longer considered to be of long term strategic fit.  We considered that Fidelity, combined with LGIM’s ongoing asset management, offered a scale and expertise to provide customers with an attractive proposition to meet their investment needs.  We recognise that this is a highly competitive product marketplace and that LGIM would be better placed focusing on its other business segments, including our retail intermediary business, and pensions.”

There are two parts to an investment,

1. the platform/product provider who does all the admin, sends your statements, you deal with etc and
2. the underlying funds.

It has effectively sold the side that deals with that first part – the admin.

Financial advisor, David Braithwaite, from Citrus Financial, explains: “If you have an L&G fund you are happy with then it stays with that fund, just to manage things going forward you will be looked after by Fidelity. In my personal opinion, L&G didn’t want to have the burden of the admin going forward, so released it to Fidelity who have the expertise/capacity to take over.  It has transferred the admin of the personal investing business to Fidelity – so the part you and I would likely have dealing with if we had personal investments such as ISAs, Investment Accounts and fixed term investments with – but pensions remain as they are, they are not being transferred over.”

What does this mean for your investments?

Not a huge amount, unless you manage your investments yourself.

David Braithwaite says the change doesn’t have to mean anything for account holders unless they want it to. “You can carry on in the same fund as before,” he says, “but unless you regularly look at and actively manage your funds (most people don’t) then it shouldn’t cause you an issue other than a change of name and stationary when they send you statements,” he says.

“That said, it’s a great time to review your fund/s in light of this, as Fidelity have a greater fund choice than where you were with L&G so it might be timely to review your funds and make any changes with a wider fund choice now available to you than you had before.   What I can’t establish is if there is any change in cost, but Fidelity are well-known in this space for having cost-effective investments so I wouldn’t be panicking.

“One thing that will change is that if you do manage your investments online through their portal, this access has ceased, and you will need to re-register with Fidelity to access and manage your account with them instead.”

A spokesperson from Fidelity International points out the advantages of being with them: “Customers who transferred to Fidelity Personal Investing now have access to the full capability of its investment and pension platform. This includes our entire range of over 3,000 funds, shares, investment trusts and exchange-traded funds which can be held in an ISA, SIPP or Investment Account.” It’s certainly worth a look.

Is Fidelity a good place to leave your investments?

Fidelity International has a long-established brand and their trading platform is quite popular with a number of investors. They also produce many of their own funds that investors can choose from.

David Braithwaite says “Nothing wrong with them, and from reading between the lines, you should hopefully get better service for any administration that L&G could offer going forward.”

Elizabeth Bickham from L&G adds “if the reader would like further information in addition to those customer mailings and details, we would guide that he contact customer services, or indeed the Fidelity team to talk through his queries and any additional questions – they should be far better placed than ourselves to ensure that your reader receives the detail needed to support his decision-making, or that the reader approaches a financial adviser to support their individual advice needs and requirements.”

Certainly there won’t be a change on the fees you pay now that your products are managed by Fidelity. Fidelity International’s spokesperson says “most LGIM customers transferring to Fidelity Personal Investing will pay the same or less right from the day they joined us. Additionally, the small remainder will pay no more than they paid at LGIM for at least 12 months from the date they moved to Fidelity.”

Further details of their standard charging structure can be found here.

As for the cash incentive to move more investments onto the platform, it could be worth it at least in the short-term. Take a look at their fees for hosting your investments and compare them to what you are paying elsewhere. If the numbers make sense then that could be a good reason to move more to them.

If you don’t like it, what should you do?

It depends on what you are holding at the time.

• If it’s an ISA then you are free to transfer to another provider – just make sure you let the new provider action that transfer for you – DON’T just cash in your ISA with L&G/Fidelity as you will you will lose the tax-free ISA wrapper status and then be limited to funding anew at £20k per tax year.
• For the Investment Account holders – be careful of capital gains tax, so again don’t just encash and start again – find a new provider and have them action an “in-specie” transfer would be better as then no gain would be realised, they will lift up the current funds as they are and move them for you without encashing.

This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.