Hargreaves Lansdown - High Charges Warning

dunstonh

L&G funds pay trail commission so they would cover the platform charge (which is currently implicit with HL). Of course, post 2012 when that isnt allowed, you will see the platform charge explicitly although in reality its likely to be no little or no different to how it is now (i.e. it adds up to the same but you just know exactly how much each area is being paid rather than just the total).

If you have a large investment, it may be worth paying an IFA to set you up a Skandia investment on execution only. You can get trackers on their platform at 0.1% and 0.2%. A small set up fee to the IFA would be pretty much recovered in the first 12 months and thereafter you are in the money.

Re : the comment about experienced investors not using unit trusts as trackers, what would the better alternative be?

ETFs are more commonly used although now that you can get unit trusts/OEICs much cheaper there isnt much in it.

Newbie2saving

ViolaLass wrote: »

I'm rather confused by this thread as this tracker

http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/legal--and--general-uk-index-class-r-accumulation

which I happen to hold also does not appear to attract an extra charge from HL. Am I looking in the wrong place?

No your tracker is as it states. IF you look on the fidelity moneybuilder UK index as per the OP's comment you will see a little number after the charges which when you read at the base of the page states if you hold this particular fund with H-L within the vantage ISA it is subject to the additional 0.5%+VAT charge. Hope this helps.

david78

You don't pay the extra 0.5% plus VAT if you hold Fidelity MoneyBuilder UK index in the Hargreaves Landsdown Fund and Share account (only in their ISA and SIPP).

Also you can hold the HSBC tracker funds in the ISA without paying the extra 0.5% plus VAT.

jamesd

There's also a £200 per account cap on those extra charges, equivalent to 0.5% on £40,000 invested. I haven't checked whether that's per sub-account, one each for ISA, SIPP, Fund account, or for all combined.

barny_100

Newbie2saving wrote: »

Just shows you it pays to read the T&C's and small print in fine detail with the different fund supermarkets offering different charges. Good spot.

Not really, H&L are quite up front about it. When you look at a list of funds some have * next to them and at the bottom in normal sized text it says they incur the 0.5% fee.

Nothing underhand or well spotted about it TBH.

fg22

dunstonh wrote: »

If you have a large investment, it may be worth paying an IFA to set you up a Skandia investment on execution only. You can get trackers on their platform at 0.1% and 0.2%.

How does the TER of these funds compare to the 0.27% of HSBC ones available on HL?

dunstonh

How does the TER of these funds compare to the 0.27% of HSBC ones available on HL?

The 0.2% ones are the Blackrock CIF trackers. Just checked and the TER adds between 0.02 and 0.09% (the latter being the emerging markets tracker).

The 0.1% is the fidelity moneybuilder uk index which has a TER of 0.27%. The HSBC and L&G ones are on there as well.

Net of charges, the blackrock ones conistently outperform L&G and HSBC.

ie. 19/08/2005 (launch date of the youngest fund) to 18/03/2010
for Asia ex japan
Sector Average: 97.67%
Blackrock 84.14%
L&G 79.34%
HSBC 76.58%

Newbie2saving

barny_100 wrote: »

Not really, H&L are quite up front about it. When you look at a list of funds some have * next to them and at the bottom in normal sized text it says they incur the 0.5% fee.

Nothing underhand or well spotted about it TBH.

I didn't mean it was underhand, just as per the OP has highlighted it is worth doing thorough research in comparing who you invest with to ensure you are getting the best deal.

Rollinghome

dunstonh wrote: »

Most? I dont think so. Apart from newbie investors who have read an incorrect article at fool, I dont think most would want to. Experienced investors wouldnt use unit trusts for trackers.

Professional investors for institutions, including the largest sovereign wealth funds, hold vast sums in tracker funds and in recent years most of that will have been in ETFs: 90% are owned by institutional investors.

http://www.ft.com/cms/s/0/300507f8-0cce-11df-b8eb-00144feabdc0.html

So are investors deserting actively managed funds in favour of funds that passively track an index, as most ETFs do? It looks that way, but the comparison may be misleading, as ETFs are at least as widely used by institutional as retail investors. In Europe, the split is estimated at 90 per cent institutional and 10 per cent retail, while in the US it is 50/50.

But the primary reason for that is scale. Now that costs for UT/OEIC trackers have dropped still further small time investors putting just a few bob, say a couple of thousand, may still be better off with a UT/OEIC tracker than an ETF.

Last autumn HSBC stopped paying commission to advisors and so were able to drop the AMCs from up to 1% to 0.25% - similar to or less than many ETFs. ETFs have broker fees and even with a cheapo broker charging £10 for buying and selling adds a full 1% to the cost of putting £2K into an ETF. There’ll also be a spread of maybe another 0.5%. The advantages of ETFs are the wider range available and instant buying/selling. Those can be less important to someone interested in just the main indexes so smaller investors need to do the sums first.

dunstonh wrote: »

Plus the taxation in the US favours trackers rather than managed. Most of the myths on trackers are based on the US market and then ported to other markets where the same may not be true.

That’s often trotted out, especially by IFAs with a eye to commission, but less often that in rip-off Britain we pay around twice as much for managed funds as they do in the US.

dunstonh wrote: »

The 0.2% ones are the Blackrock CIF trackers. Just checked and the TER adds between 0.02 and 0.09% (the latter being the emerging markets tracker).

The 0.1% is the fidelity moneybuilder uk index which has a TER of 0.27%. The HSBC and L&G ones are on there as well.

Net of charges, the blackrock ones conistently outperform L&G and HSBC.

ie. 19/08/2005 (launch date of the youngest fund) to 18/03/2010
for Asia ex japan
Sector Average: 97.67%
Blackrock 84.14%
L&G 79.34%
HSBC 76.58%

I’d be very wary of making a comparison on the basis of one fund, especially one for Asia ex Japan or “emerging markets”. What index are they tracking if any? Are they all covering the same equities or even the same regions? HSBC calls its fund Pacific (ex-Japan) in the document I’ve seen without mentioning any index and is that with the new low AMC or the previous one. L&G tracks FTSE World Asia Pacific ex Japan Index.

What about the plain vanilla FTSE All-share versions which would give a more straightforward comparision?

dunstonh

That’s often trotted out, especially by IFAs with a eye to commission, but less often that in rip-off Britain we pay around twice as much for managed funds as they do in the US

Its a good job I am fee based then and still trot it out.

I’d be very wary of making a comparison on the basis of one fund, especially one for Asia ex Japan or “emerging markets”.

Feel free to check the others.