Chip X charges just don't add up for small investors

Hello, I’ve just been doing some sums on Chip X and it looks like you’re pricing out small investors.
Lets say Chip automatically takes out £5 a week and you’re on Chip X. Over 12 months you’d need the fund to grow by at least 15% to break even or you’d just be losing money.
What are the saving thresholds to make it worth while?

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How can that be worked out as it’s all investment funds which can go up and down? You may earn nothing……

That’s what I’m trying to work out. Is it worth is for a small investor?

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Well it could be….you need a crystal ball

But it’s the same for any investor big or small

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Monkeyboy you are correct and yes as RH stated investments can go up or down but you were looking on the positive side if there was a positive growth over the year. The smaller amount you invest into chipx you do end up losing due to the charges so it’s not worth investing unless you can save a bigger portion per month or have an amount already saved up to transfer across to start gaining any benefit.

But don’t all investment funds charge for usage? Are you saying it’s not worthwhile investing with Chip, or not worthwhile investing in general? The individual would need to decide if it’s worth their while for ChipX, or use ChipLite for free, still earning interest, and not investing.

It’s similar to credit cards/current accounts that charge you to use, as the individual you need to decide if it’s worthwhile or not to utilise.

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Sure, yes they’re not “free”. But for example a small investor putting away £20 a month, with ChipX there’s a 28day fee of £3 then the fund fee (p.a.) of 0.25% on top of that. With Hargreaves Lansdown investing in the Ballie Gifford Positive Change fund just has a 0.53% fund fee.
If you’re going to drop a grand a month on ChipX, yeah, you won’t notice the charges. But if you’re going to encourage first time investors to start small, this doesn’t seem cost effective.
If you’re looking to grow your customer base, this seems to be a big barrier to getting small investors onboard.

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Fully agree, the fees act as a performance drag, and what is with the overly complicated fee structure?

ChipAI is £1.50 every 28 days, so £19.50 a year and you also have a 0.75% platform fee.
ChipX is £3 every 28 days, so £39 a year and 0.25% platform fee.

Lets say low users can save £100 a month, medium users £250 a month, and high net worth users £500 a month.

Low user with average balance of £600 in year 1(1.2k saved in 12 months)
ChipAI £19.50 fee plus £4.50 so £24 paid in fees or 4% all in fees year 1.
ChipX £39 fee plus £1.50 so £40.50 paid in fees or 6.75% all in fees year 1.
ChipAI £19.50 fee plus £13.50 so £24 paid in fees or 2.92% all in fees year 2.
ChipX £39 fee plus £4.50 so £43.50 paid in fees or 2.42% all in fees year 2.

Medium user with average balance of £1500 in year 1 (3k saved in 12 months)
ChipAI £19.50 fee plus £11.25 so £30.75 paid in fees or 2.05% all in fees year 1.
ChipX £39 fee plus £3.75 so £42.75 paid in fees or 2.85% all in fees year 1.
ChipAI £19.50 fee plus £33.75 so £53.25 paid in fees or 1.18% all in fees year 2.
ChipX £39 fee plus £11.25 so £50.25 paid in fees or 1.12% all in fees year 2.

High user with average balance of £3000 in year 1(£6k saved in 12 months)
ChipAI £19.50 fee plus £22.50 so £42 paid in fees or 1.4% all in fees year 1.
ChipX £39 fee plus £7.5 so £46.50 paid in fees or 1.55% all in fees year 1.
ChipAI £19.50 fee plus £67.50 so £42 paid in fees or 0.97% all in fees year 2.
ChipX £39 fee plus £22.5 so £61.50 paid in fees or 0.68% all in fees year 2.

So a new ‘low’ saver is best staying on ChipAI for the first two years, and a medium/high saver is better starting on ChipAI in year 1, and switch to ChipX in year 2.

OR

Given these are fixed amounts people can save - £100-500 a month, a quick 2 min google tells me I can open up an account with Fidelity, setup a direct debit and pay a simple 0.35% platform fee. Chip would only be cheaper than Fidelity, when the £39 ChipX fee falls less than 0.1%, so would actually be a benefit to a user with £39k or more saved.

Is that the new target audience for Chip?

Its all quite complicated to work out really. I just cant see what Chip’s target audience is anymore. At first I thought it was to help the little guy save, and then grow their savings/wealth over time, but the fees are a pretty big barrier, especially compared with the competition.

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You have highlighted that it’s relatively more expensive for a “low” level saver to access investment products. This is not unique to chip. Same everywhere when fixed costs are involved. Fidelity charge a fixed £10 for each online transactions. Hopefully in time, with access to higher returns and regular investment long term the drag becomes less. Also, no return assumptions when suggesting low level savers stay on AI. Why shouldn’t low level savers access potentially higher returns? That’s the whole premise of Chip X. It’s more expensive to access, same everywhere, but doesn’t mean they should park in cash, potentially lose more in real terms due to inflation. That initial cost would hopefully turn out to be insignificant long term.

Its not unique to Chip no, but there are multiple providers that only charge a scalable platform fee, which is ideal for anyone starting out.

On the other end of the scale, some providers cap costs, or reduce fees for higher net worth individuals. I’m just not sure where Chip fits on the scale, if anywhere at all is the point I am trying to make, but hopefully they have done their research and it works out for them.

The Chip offering certainly is not simple, nor can I see a target audience where it adds value.

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I’m not sure. Wealthy people enjoy being ripped off too!

Are you suggesting you don’t get nuffin for nuffin??!..

The £1.50 is justified for the value of the autosaving function. I’m happy to pay that to remove the need to think about saving. For a lot of Chip’s users, the option won’t be Chip vs another provider, it will be Chip vs not saving anything.

The ChipX fee is less appealing to me at the moment, although if you use it to open an ISA, £3 a month is the same as Freetrade charge for their ISA (no 0.25% fee there of course). If/when autosaving into funds is enabled, I think £3 will still provide value although you are to say less so if the first years.

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I had been with fidelity for several years. To be hones there are no fund buy charges as some other user highlighted (if you invest every month).
The 10£ charge is to buy shares or ETF. This is not even offered via Chip so I wouldn’t compare those charges.

Eventually i switched to trading 212 which doesn’t charge anything for any type of transactions (except forex).

This is great comparison. Hopefully someone from chip will see this. I am not suggesting there is anything wrong in charging fees. It just seems that they could do with a review of some of these fees.

But there are 2 problems.

  1. complicated fees structure. Whilst they sound it simple on emails when put in practice it is hard (chip ai, auto save, fund charges ). Considering chip is for individuals who are not actively saving today, if they see their balance has actually reduced after 2 years they may give up on savings all together (6-8% fees is just unacceptable from my point of view).
  2. as of today there is no competition for chip auto save. However, investment market is extremely competitive. And there is no way chip would make it to the top 5 with current fees structure. So its fine if they are only looking at market who hasn’t been saving at all. But if they are also looking to attract customers who are saving (small amounts) elsewhere chip needs to review their price plan.
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There actually is competition out there.

To list some out:

  • Moneybox (saves the round up on what you spend). £1 a month subscription fee, 0.45% platform fee.
  • Plum £2 a month minimum, and a 0.15% Investment platform fee.

Then there is the cost on top of the fund you invest in but easier to exclude them to compare as close to ‘like for like’ as possible.

Much simpler to understand fee structure as well, and doesn’t disadvantage new savers.

Plum is probably the closest to be fair, and longer established in the investments department.

If you take its fee structure, then:

Low user
£24 fee plus £0.9, so £24.90 paid or 4.15% all in fees year 1.
£24 fee plus £2.7, so £26.7 paid or 1.48% all in fees year 2.
Medium user
£24 fee plus £2.25, so £26.25 paid or 1.75% all in fees year 1.
£24 fee plus £6.75, so £30.75 paid or 0.68% all in fees year 2.
High user
£24 fee plus £4.5, so £28.5 paid or 0.95% all in fees year 1.
£24 fee plus £13.5, so £37.5 paid or 0.42% all in fees year 2.

There is also depoway and a couple of others launching later this year.

I liked Chip as an original investor, with the plan to help grow peoples money, and pool that to generate better interest returns for all. I also get that the markets have moved on since and interest rates are at an all time low. Similarly offering investments is a great long term way to build up peoples savings and revenue, but it has to be in a simple and intuitive way for the target audience. It doesn’t need to be the best, just ‘up there’ and ‘good enough’ to keep people on the platform.

I’m not sure what the target audience is for chip, everyone I have referred has left. Perhaps my group/social circle or however we want to dress it up are no longer in the right demographic of users for this kind of product.

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Thanks for the comparisons and points above. Came here today after wondering if £3 a month is worth it or not. As an investor, this does worry me, especially as my referals have left as well.

Do Chip engage in these threads?

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Absolutely as you said above @Rdougal :point_up: I’m still holding off from investing as I just don’t feel confident as to whether the various fee charges might actually wipe out the benefit of what I would invest. If there could be one fee it would make it so much easier and appealing to get going and worry less about parting with my hard earned £s!

Hi All

Just reading through the forums at the end of the week. As always good to hear the feedback.

Interested to know what you think a simpler fee structure would look like? Do you mean like Interactive Investor fixed £9.99 a month? We are seeing a cohort of savers who have substantially large balances in the funds already - considering a fixed £5 a month price plan might be better?

I thought £3 + 0.25% was pretty clean and simple for ChipX though.

Simon

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Its a while since I’ve looked at the pricing.

https://getchip.uk/chip-pricing

ChipX

£3.00 / 28 days

Designed to turbocharge your growth with all the best features of Chip. Level up your savings with ChipX.

Plus

0.25% annual investment platform fee collected monthly (no minimum fee).

You cant have one without the other as they are packaged together, so which is it. No minimum fee, or a minimum fee of £39.11 a year plus 0.25% of any holdings?

Also:

What’s the total cost of using Chip Investments?

To access our investment platform you need to be on one of our subscription plans, either ChipAI (£1.50 every 28 days) or (£3.00 every 28 days), as well as the platform fee.

Fees you will need to pay to invest on the ChipAI plan:
• 0.75% annual platform fee, collected monthly (£0.50 minimum monthly fee).
‍>
Fees you will need to pay to invest on the ChipX plan:
• 0.25% annual platform fee, collected monthly (no minimum monthly fee).

Not the easiest to follow.

ChipX its £3 every 28 days plus 0.25% every month. Why not keep the invoice period for all Chip charges the same?

ChipAI - Could we not charge £2 every 28 days(or month), and then 0.75% in fees on balances over £800-1000? The £0.50 complicates things as ChipAI users just wanting help to save up a cash emergency fund might not want to use the Invest platform.

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