SIPP, Hargreaves Lansdown and Funds

EdInvestor

You make SIPPs sound difficult.In fact the cheap online SIPPs are much easier to operate than a conventional insurance company pension in my experience.

dunstonh

You make SIPPs sound difficult. In fact the cheap online SIPPs are much easier to operate than a conventional insurance company pension in my experience.

Ed, you sound exactly like the sort of person that article is referring to.

Why is it that whenever an adviser mentions you should act with caution that you try to waive our comments as being irrelevant?

We have said for some time that you should know what you are doing before going into this sort of contract and now you have the FSA getting concerned and media articles saying the same.

SIPPS are not as easy to operate as personal pensions. With personal pensions you dont have to worry about trusts and cash. The added flexibility that is offered with a SIPP can also be a problem to some.

I like the SIPP options and if the person knows what they are doing or has an adviser that knows what they are doing then its a great product. However, the fund choice on a number of these execution only SIPPs is awful. Its reliant on past performance and fashion investing. Too much reliance on doing things like looking at citywire and picking from the top 10 funds or relying on advice from fairweather only investors (those that have never seen a crash since they went DIY).

There are other issues like what happens if the individual gets bored with monitoring their SIPP and finds the income going into the cash account but doesnt get it moved over? What if they think they are doing the right thing by going into a SIPP and then pick one fund or even a handful which are cheaper on stakeholder or personal pension?

This isnt about not doing a SIPP. I use unit trust funds whenever I can. However, I still use stakeholders (albeit rarely now) and personal pensions as not everyone is ready for SIPPs. Its about knowing what you are doing before you do it and not getting carried away with only the positive things and ignoring the negative.

EdInvestor

I'd have thought anyone who can operate an online bank account wouldn't have much trouble with an online SIPP.

As for choosing investments, there's not much difference for a novice these days: they are just as likely to make a sub optimal choice in a conventional pension.

As to your point of money being in the cash fund, if you look at the performance of many funds over the past six or seven years (WP, trackers, balanced managed), then the investor would have done better to stay in cash in a SIPP with a decent interest rate and no annual fee.

dunstonh

I'd have thought anyone who can operate an online bank account wouldn't have much trouble with an online SIPP.

Which is still a minority of people then.

As to your point of money being in the cash fund, if you look at the performance of many funds over the past six or seven years (WP, trackers, balanced managed), then the investor would have done better to stay in cash in a SIPP with a decent interest rate and no annual fee.

Is there a SIPP that makes no annual fee if you invest in cash only?

Anyone looking at the period only encompassing the crash shouldnt be considering a SIPP. Short term fluctuations will happen and if you dont understand that then you are not suited.

In hasnt been hard to return in excess of 50% in the last 5 years. We dont need to debate with profits of balanced managed funds as neither of us like those but we have seen someone on this forum stick their money in a balanced managed fund in a SIPP just recently.

brasso

Jake'sGran wrote:

In passing, I too would say that the HL site is rather messy to use but I buy funds through them because of the better discounts. I have yet to find a good site on which I can keep my portfolio details with individual purchase dates etc.

I'm not sure if you're aware, but HL have redesigned and relaunched their website in recent weeks. IMO it's an enormous improvement. It no longer has the air of a website that's grown organically into some navigational monster.

In particular, the areas dealing with your portfolio are much improved, offering clearer summaries of your holdings, their total value, and easy access to statistics and charts relating to the performance of each entry. Another link next to the stock/fund name allows you to refer back to the date you bought and how much you paid. There is also the ability to save each day's summary as a PDF file.

All in all, I'm feeling quite positive towards HL at the moment even though I have been fed up with them in the past, partly because of the previous website, and partly because their customer service hasn't always been great (not that I've often needed it). The other remaining whinge I have about them is that they seem to send me enormous quantities of paper that I really don't want, and which is presumably paid for out of fees I pay.

On the positive side, they are a highly reputable firm with, seemingly, a lot of expertise and credibility. The choice of funds, stocks and other investment options is huge, and you can do a lot of research from the info available on the website.

I've no doubt whatsoever that other companies offer a decent service too but my opinion, based on having a 2 year old SIPP that I look at several times a week, is that HL must be among the best and easiest to use.

As with all things web-based, the offerings will change and, we hope, improve as time goes on, so this verdict isn't set in stone. It's unimaginable how different these websites will look in 5 or 10 years time. But just at the moment, I'm happy to recommend HL.

EdInvestor

dunstonh wrote:

Is there a SIPP that makes no annual fee if you invest in cash only?

Sure. if you wanted to save in cash (and get the tax relief) you would pay no annual fee at Sippdeal - just 15 quid to set up the direct debit for regular conts and/or a transfer-in fee for an old pension.

http://www.sippdeal.co.uk/charges.aspx

Note the interest rate is the same for the whole balance.

Might attract some risk averse people with old pensions mouldering away in zombie funds. With some of those old legacy pensions, you wouldn't be making as much as 4%, the charges are so high.

jenney

Can anyone comment on whether the fees indicated below by Hargreaves Lansdown look reasonable. I apologise in advance for the detail in this email. I am slightly surprised at the level of upfront fees, which they justify by saying that paying on a fee basis is to ensure independence, but they are then getting so much of my money under management by recommending their own products (see below: portfolio management service and SIPP).

Upfront fees are 3% for first 100,000 of capital, 2% for next 50,000, 1.5% for next 350,000 and 1% over 500,000. They also charge an up-front fee for advice on regular future investments.

On top of those fees they charge "a maximum of 0.5% per annum (plus VAT if appropriate)".
They later say that "the average underlying management charge (AMC) for this portfolio is 0.99%. The explicit annual charge for the HL Portfolio Management Service is 0.475% plus VAT (this covers the annual tariff of 0.5% mentioned above)."

They then say that the total expense ratio for the investment/pension portfolios is 2.22% (this includes the AMC and the "explicit annual charge" for the Portfolio Managed Service.

The advice, in essence, was:

"Transfer existing Scottish Equitable, Norwich Union and Friends Provident pensions to our SIPP. £100,000 will be invested in our Portfolio Management Service. Circa £25,000 will be managed by you.
Transfer NPI pensions to a new Scottish Widows pension.
You will also contribute £3,000 per month to the new Scottish Widows pension.
You will contribute £36,000 as a lump sum into our SIPP with £26,000 invested into our Portfolio Management Service and £10,000 into the Norwich property fund.
You invest £7,000 each into our ISA/Portfolio Management Service.

The total fee for the advice and implementation of the above is £5,000. This includes £1,000 for advice relating to the regular contributions and £4,000 for the capital/transfer investments. This represents a reduction of £1,130 based on the original fee quoted. The fee will be collected as an initial charge from the new Portfolio Management Service investment to not incur any VAT."

So, I approached the first meeting wanting advice on transfer of my personal pensions into a SIPP which would effectively cost nothing if invested in the HL Vantage SIPP but I wanted advice on transfer values and whether I would be losing out too much on transfer. I have ended up with a 5,000 bill for doing not much different than I originally intended and they get my money under management. I am prepared to pay a reasonable fee for analysing whether the transfer is beneficial but I have had advice only on costs, no figures showing relative future performances taking fees into account.

I don't feel that 5,000 of work has been done and I don't feel that the advice has been completely independent (although I recognise that the future regular contributions are recommended to be outside the SIPP and their PMS). Am I being unfair?

Based on the HL advice, their advice charge and TER mean that my fund has to grow about 5% in year one and 2.22% per annum thereafter before I make any return on investment. Does that seem sensible? Dare I raise the question of whether the Selestia wrap (or whatever it is) might be better for me?

brasso

This sounds like it might be a case of misunderstanding about the word "advice".

I also wanted to transfer a number of small investments into one Hargreaves Lansdown SIPP.

I called them and asked them how to go about this. They explained the basics of how it worked, and sent me a form which I completed and returned, listing the investments I wanted to transfer, and that was it. No charge.

What you've been charged for by the sound of it, isn't advice on how to transfer the money, but investment advice. They are making recommendations on what you should do with your money once it is in the HL SIPP. I've never asked for such advice. All I wanted to know was how to get the money in. They did ask me if I was interested in their investment advice service which of course was chargeable, but I said no - I wanted to my own research.

You appear to have signed up to some sort of actively managed service in which they decide how and where to deploy your cash. If you're saying that you're unhappy with the investment advice, or that you think it's overpriced, that's something you have to resolve with them.

It does sound like quite a lot to pay though of course I don't know the full details, or what preliminary conversations took place between you.

margaretclare

I think the whole idea of a SIPP is that you don't get 'advice'. Self-invested personal pension means you do it yourself. 'Advice' means going to an adviser and paying for the advice. You still have to make the decision yourself as to whether to go with the advice given, or not.

[BI'd have thought anyone who can operate an online bank account wouldn't have much trouble with an online SIPP.[/B]

Which is still a minority of people then.

Oo-er. I hadn't realised that DH and I were in such a minority. Both been doing online banking for a few years now and me with my H-L SIPP.

Margaret

dunstonh

Upfront fees are 3% for first 100,000 of capital, 2% for next 50,000, 1.5% for next 350,000 and 1% over 500,000. They also charge an up-front fee for advice on regular future investments.

On top of those fees they charge "a maximum of 0.5% per annum (plus VAT if appropriate)".
They later say that "the average underlying management charge (AMC) for this portfolio is 0.99%. The explicit annual charge for the HL Portfolio Management Service is 0.475% plus VAT (this covers the annual tariff of 0.5% mentioned above)."

Sounds very close to the typical maximum commissions plus they are charging you on top of the natural commission.

A new model IFA would charge 1% of the amount invested (often with a cap on larger amounts) and keep the natural 0.5% commission that the funds generate. (HL are charging 0.5% on top of that).

On DIY terms, the Selestia pension would be a lot cheaper. Even on advice terms with an IFA you could get cheaper as well.

I can imagine that HL get a lot of requests for advice as their DIY product is very good value. However, due to the demand for advice, they dont have to be as competitive (guessing only as to why they are so close to usual maximums).