HSBC Investing: Eye-watering dealing charges and a confusing separation of funds and shares

• Investors who do not want to invest regularly
• Investors wanting a ready-made investment portfolio with good historical performance

If you want to “pick ‘n' mix” your investment assets, and include a combination of UK shares, international shares, funds, or gilts within your portfolio, there are easier and cheaper ways to do it elsewhere. And it's a very pricey place to be a regular share trader.

Accounts

HSBC Investing provides customers with access to the following accounts:

• General investment account (GIA)
• Stocks and shares ISA
• Self-invested personal pension (SIPP)

If you want to invest in shares, you'll have a choice of InvestDirect and InvestDirect Plus accounts. Both are free to open but offer slightly different benefits so choose carefully. US stocks are only available within the Plus account, for example.

HSBC doesn't offer any junior accounts, so no Junior ISA or Junior SIPP, which is a shame.

Stocks and shares ISA

A stocks and shares ISA is a tax-efficient way to invest your money for the future. It allows you to put your money into a range of investments while protecting any income and capital gains from UK tax.

The fact that HSBC separates out the way you go about investing in stocks from investing in funds makes HSBC a poor choice for those who want the flexibility of combining both in their portfolio. You'll need to open an InvestDirect share dealing account to add shares, investment trusts, gilts (UK government bonds) or exchange-traded funds (ETFs) to your general investment account or ISA, but to invest in funds, you'll need to go through the Global Investment Centre and open an entirely different account. And you can't open more than one ISA per year with HSBC – so all you can do is open an ISA invested in shares one year, then let that lie dormant while you open an ISA invested in funds another year. You cannot have both active at the same time. This will not suit investors who want to take an active role in the management of their assets.

One additional thing to note with HSBC's Stocks and Shares ISA is that it isn't a flexible ISA. That can be a problem if you want the flexibility to be able to remove money from your ISA, because the money you've removed will still count towards your annual allowance, and you can't pay it back in without it counting twice.

Discover our best-rated investment ISAs, including options for flexible stocks and shares ISAs.

Self-invested personal pension (SIPP)

Unlike high street rivals Barclays and Halifax, HSBC doesn't outsource administration of their SIPP to a third party. That means the only costs you'll incur are a 0.25% product fee plus the additional fund charges. Total fees currently range from 0.66% – 0.74%. (If you're an HSBC Premier Investment Management Service customer, the only charges are those that apply to the discretionary management service.)

However, if your picture of a SIPP is of a product that gives you oodles of choice, you'll be disappointed with HSBC's SIPP. There are just 10 funds to choose from: 5 from HSBC's Global Sustainable Multi-Asset range, and 5 HSBC World Selection Portfolios. Whilst different risk appetites are catered for within the ranges, this is a very limited selection for a SIPP.

Want more choice? See our suggestions for the UK's Best SIPPs and personal pensions here.

Assets

HSBC offers a reasonably good choice of assets to invest in across its two different investing centres, including ready-made portfolios, more than 450 funds, 250 investment trusts, 400 ETFs, as well as more than 4,600 stocks and bonds.

Access to US stocks, however, is limited to Invest Direct Plus customers so if you want access to the New York Stock Exchange and/or NASDAQ then you'll need to select the Plus account.

If you want access to European markets, or any from the rest of the world, then HSBC is no good for you. If you're looking for a far wider range of global assets, read our reviews of interactive investor, Saxo Markets, or AJ Belll.

Ready-made portfolios

The HSBC Global Strategy Portfolios contain a mix of ready-made bundles of investments, managed by professionals designed to align with the following different risk profiles:

• Cautious
• Conservative
• Balanced
• Dynamic
• Adventurous

HSBC ready-made portfolios have performed very well an average performance over the past 5 and 10 years that is well above the industry average as you can see from this chart. You can change the number of years by toggling between time periods at the top of the chart.

I would strongly advise reviewing the

The way you are charged varies according to what you are trading. HSBC can be a cheap way to invest but there are some whopping great potential extra costs that aren't entirely obvious at first glance.

If you are using the Global Investment Centre (to invest in funds), then you'll be charged an annual account fee (payable quarterly) of 0.25% of whatever you invest. You'll also need to pay fund charges on top, which vary according to the fund you choose and are deducted directly from your fund holdings. Fund fees are standard with funds, and you'll generally find them whichever provider you choose. HSBC's ready-made portfolio costs total between 0.45% – 0.50% including HSBC's annual 0.25% account fee.

Annual fees of 0.25% are very competitive, meaning HSBC is a low-cost provider if you just want to invest in funds. Having said that, the 0.25% rate doesn't fall if you have a particularly large portfolio. While some providers will drop fees altogether once a portfolio reaches, for example, £1m, HSBC doesn't do that. You could, therefore, end up paying way over the odds if your portfolio is high value.

One great thing about investing in funds with HSBC is that there are no additional dealing fees to worry about when you're buying or selling your funds.

For share dealing, things are different. You'll need to pay a flat, quarterly account fee of £10.50. That could be exceptionally cheap if you have a large portfolio as it's the equivalent of being charged a low annual fee. However, if you have a small amount invested, that could work as comparatively expensive. On top of the annual fees for share dealing, you'll need to factor in trading costs. If you're an InvestDirect customer, online dealing fees for UK shares are a high £10.50 per trade. If you are an InvestDirect Plus customer (high value traders), there's a slight discount which means that you'll pay £7.95 after your 9th trade in a calendar quarter. That £7.95 is still considerably higher than most big-name investment platforms, however. AJ Bell charges from £5.00 to £3.50 per trade, for example.

But if you thought that was bad, there's far worse. HSBC charges customers £39.95 per trade to buy or sell gilts (government bonds)! That's outrageous! And it's not the only loopy pricing. You'll also be charged €29.95 per trade if you want to buy or sell EU shares and an equally mystifying $29.95 to buy or sell US shares (which are only available to InvestDirect Plus customers).

I have no idea how these justify these prices and there is no way on earth that I'd pay them when BestInvest charges nothing to trade US stocks, and the likes of Trading 212, Freetrade and eToro, offer commission-free trading. It's barmy pricing.

The only possible justification is that HSBC is very unusual in not charging FX fees on non-UK Sterling transactions, and this is where they recoup their losses. However, and it's a big however, if the size of your trade is relatively small, you FX fees on non-GBP assets would also be small. Being charged a big fat, flat fee of $29.95 to make one single trade is totally disproportionate and personally, I'd feel I was subsidising the huge trades that are potentially better off with this fee than if they'd had a percentage of their trade charged as an FX fee. It also doesn't explain why buying and selling UK government bonds (gilts) costs an astronomical £39.95. There are no FX fees here, and a cost like that could wipe out your entire gains if you're a smaller-scale trader.

Overall – be very careful with HSBC if you're doing anything other than invest in funds.

Have a question about HSBC that we haven't covered? Ask it here and we will get back to you as soon as possible!