Hagreaves Lansdown - Poor Independent Advice and Asset Management

PatrickGrant

I would be interested in learning more about member's experiences relating to Hargreaves Lansdown's "independent advice" and investment recommendations. I am particularly interested in any information relating to whether the advice could be construed to be independent and the real quality of its independent investment recommendations. You can PM me details rather than publish them.

On the advice of the Hargreaves Lansdown Independent Financial Adviser four years ago, I invested in one of Hargreaves Lansdown Asset Manager's Funds. The return has been 1.11% pa which is about half the average return from the IMA Active Managed Fund Sector and less than you could get in a building society. (I cannot find a copy of the contract and assume the adviser did not leave it with me since I have all the other correspondence relating to this issue.)

I know there has been a recession and values can go down as well as up. However, HL invested in largely its own products and not those of funds that regularly generate growth in the top quartile which is what you might reasonably expect from Independent Financial Advice. What I notice is that HL certainly got 3% in commissions at the time for the advice given. It could also have got up to about 2% pa in trail back in commissions and expenses from the TER on investments in its own funds.

I do not mind paying for IFAs providing I get value for money.

I do not believe I got value for money from HL's Independent Financial Advice. This is demonstrated by the fact that at the same time I put the other half of my money under Best Invest's advisory services. The investments with Best Invest as advisor have performed extremely well and almost doubled in the same period.

I note that HL has recently been fined £300K by the FSA for failing to advise customers of the risks they were taking.

In this case, HL must reasonably have known it was underperforming its sector. Curiously, it has regularly published a graph that, on the face of it, shows its investment doing better than the sector it claims to beat. However, what the graph does not show clearly is the difference in performance between the fund and its sector clealy enough. Any narrowing of the gap between the lines showing sector and investment performance is almost imperceptible.

dunstonh

You have now posted similar information in three threads (the other two threads unrelated to your issues). However, you havent really posted any facts or background or have conflicting information.

The return has been 1.11% pa which is about half the average return from the IMA Active Managed Fund Sector and less than you could get in a building society.

Active managed sector is a sector full off different risk fund. So, sector average is not a good guide.

Comparing against savings rates in a 4 year period that contains a major stockmarket crash and economic event is irrelevent. You don't invest for 4 year terms and you know full well when you invest that a crash is inevitable sooner or later. So, shortening the period down to just 4 years, two of which contain major drops, is not how you look at investments.

I note that HL has recently been fined £300K by the FSA for failing to advise customers of the risks they were taking.

No they haven't been recently fined. They were fined back in 2004 for business transacted between 1992 and 2002 where they understated the risk of a certain portfolio. The product was mainly direct offer (not advice). i.e. HL were acting as product provider not advice provider. Not what you say you were getting from HL.

However, HL invested in largely its own products and not those of funds that regularly generate growth in the top quartile which is what you might reasonably expect from Independent Financial Advice.

Did you actually seek advice or just pick one of their own brand funds?

What I notice is that HL certainly got 3% in commissions at the time for the advice given.

I was under the impression that their advice service was fee only and not commission based.

The investments with Best Invest as advisor have performed extremely well and almost doubled in the same period.

Same risk profile and asset mix or different?

You say in the other threads that you are making 30% a year with the alternatives. So, clearly we are not talking like for like. I am also sure that many of us doubt your claims of 30% a year but would love to be proven wrong.

Lokolo

They were fined for not telling customers of the risk. This has nothing to do with your bad performance and what you are complaining about. They have no relation in your case (in reality they do!)

cepheus

Is there any evidence that funds that performed well in the past are able to beat the market again in the future? The only credible reference I can find goes back to Jensen, 1968 and Grinblatt and Sheridan Titman, 1989 which suggests not.

turbobob

Do HL actually have a fund in the IMA Active Managed Sector?? You may not be comparing like with like for a start.

As far as I can tell their current line up is:

HL MM Balanced Managed Trust (IMA Balanced Managed)
HL MM Cautious Managed Trust (IMA Cautious Managed)
HL MM Income & Growth Portfolio Trust (IMA UK Equity Income)
HL MM Special Situations (IMA Global Growth)
HL MM Strategic Bond (IMA Sterling Strategic Bond)

Anyway, underperformance of investments is not an area where complaints have any chance of success. Investment performance is not guaranteed.

dunstonh wrote: »

You say in the other threads that you are making 30% a year with the alternatives. So, clearly we are not talking like for like. I am also sure that many of us doubt your claims of 30% a year but would love to be proven wrong.

Absolutely. 30% over one year (e.g. 2009) I can believe. 30% p.a. compounded over the last 3 or 4 years sounds pretty unlikely.

cepheus

Let me take an example, this is Neil Woodfords high income fund Bid to Bid, one of the best performing over 5-10 years. Over the last over 3 years you get this. Not bad, but does this beat the benchmark after the charges? Over 1 year there is no difference even before the charges!

PatrickGrant

• Hargreaves Lansdown were fined in 2004 for selling their discretionary customers zero and splits without advising their customers of the large risks involved. The purchases involved are reported to be in their discretionary management arm which buys into funds to include in their customers portfolios.
• I have invested with Hargreaves Lansdown Discretionary arm. My funds were recommended under the HL Independ Financial Advice Service. The return has been 1.11% pa over four years. Hargreaves Lansdown uses the IMA Active Managed Sector Index as its benchmark. During the four years the fund has failed to achieve its benchmark by a significant margin. HL, has declined to mention anything that might draw attention to this portfolio's perfomance (based on its own Independent Financial Advice.). But the poor performance is only partly due to falling markets. The real reason why this particular investment has not performed well against its sector benchmark is HL's stock picking for its discretionary customer's portfolios. HL don't only invest their customer's money in splits and zeros. HL invested the vast majority of mine and other discretionary customer's money in Hargreaves Lansdown very own funds like "HL - Multi Manager Balanced" and "HL Multi Manager Special Situations". These funds have not performed particularly well, they do not correlate very well with active managed perfomance and HL has not included in the portfolio any funds that might cross correlate or compensate for the risk of including them discretionary customer potfolios. There are a lot of alternative funds that perform better than these and they should have been selected for HL Discretionary clients. The criterion on which HL selected these funds may not have been growth and risk as you might expect, it was most probably a selection more based on the trail back commission they would get. I understand the FSA is looking at this issue across the Finance Industry now - and so it should. What I can say is that I have proven evidence of HL failing to reach its benchmark over several years and keeping rather silent about it. HL also have around 500 customer complaints, I wonder how many are similar to mine??? :mad::mad::mad:

pressuredrop_2

PatrickGrant wrote: »

There are a lot of alternative funds that perform better than these and they should have been selected for HL Discretionary clients.

The two funds you mention were launched in 2001. You invested in 2006.

I assume you were happy to invest in these two funds in 2006 and four years later you're unhappy with their performance.

If that's your argument, I don't get it.

Reaper

PatrickGrant wrote: »

My funds were recommended under the HL Independ Financial Advice Service.

I think you actually have a valid point there. IFAs attached to investment companies do not seem to be as independant as they ought to be. The same is true of some banks which give you the option of seeing their IFAs as opposed to bank advisors. They still seem to end up recommending investments from the group.

Furthermore a multi-manager fund is a cop out. The IFA is saying they don't know which funds to invest in so they hand control over to somebody else who charges an extra layer of fees. In my opinion you should either get direct advice from your IFA as to which funds to invest in or use a multi-manager fund, not both. I feel an IFA working for HL ought to be qualified to choose investments.

It may be a bit late for you but I would suggest using an IFA who specialises in investments but has no conection to any savings or investment companies.

dunstonh

Hargreaves Lansdown were fined in 2004 for selling their discretionary customers zero and splits without advising their customers of the large risks involved. The purchases involved are reported to be in their discretionary management arm which buys into funds to include in their customers portfolios.

The FSA report states that the product was mostly direct offer. Not advice.

I have invested with Hargreaves Lansdown Discretionary arm. My funds were recommended under the HL Independ Financial Advice Service.

Discretionary management and IFA are two different things.

HL, has declined to mention anything that might draw attention to this portfolio's perfomance (based on its own Independent Financial Advice.)

Forget independent advice. You have bought the HL service from HL.

The real reason why this particular investment has not performed well against its sector benchmark is HL's stock picking for its discretionary customer's portfolios. HL don't only invest their customer's money in splits and zeros. HL invested the vast majority of mine and other discretionary customer's money in Hargreaves Lansdown very own funds like "HL - Multi Manager Balanced" and "HL Multi Manager Special Situations".

Not uncommon for many DIMs who also offer funds. I have seen Lloyds Private banking portfolios full of Scottish Widows funds and HSBC DIM portfolios full of HSBC funds. Its certainly not desirable and does make you wonder what is going on (especially if the funds dont have significant or any discount.

There are a lot of alternative funds that perform better than these and they should have been selected for HL Discretionary clients.

I disagree but for a different reason. The whole point of using a DIM is to get access to direct investments from the whole market with active management. Not to utilise unit trust funds. If you want a portfolio of unit trust funds then you use an IFA. No point adding in an extra layer of charges by using a DIM

What I can say is that I have proven evidence of HL failing to reach its benchmark over several years and keeping rather silent about it.

Personally, I think its more down to use of a benchmark that is too variable. If you take a 1 year risk scattergraph for that sector, the risk spread is about as far apart as you can get with any sector. Plus, the trend of the dots in that scattergraph are the the higher the risk taken, the better the return was.

blinko

gents i think this guy is just here to slate as he didn't address any points put forward to him