Hagreaves Lansdown - Poor Independent Advice and Asset Management

sunil1234

agreed,:beer:

PatrickGrant

Some of the remarks made on the original post are not particularly helpful and show that one or two contributors have not grasped the issue at all. I assume they are HL Self Select SIPP investors and have little knowledge of Hargreaves Lansdown's Advisory and Discretionary Management Services. To put the issue into simpler terms:

>>> Issue No 1: I asked Hargreaves Lansdown for Independent Financial Advice on how to invest a significant sum of money. I was assured the advice was independent and have that in writing. My understanding is that this advice was paid for by a 3% commission. The advice was to invest the money on a discretionary basis with Hargreaves Lansdown Asset Managers. (If an Independent Financial Advisor does recommend their own employer's financial product, then that may or not be independent. It would depend on their basis for proposing it - which frankly I do not know yet.
>>> Issue No 2: When Hargreaves Lansdown Asset Management invested the money on my behalf, it was primarily invested in HL's own managed funds, not for example leaders in the same sectors. The benchmark for this portfolio is the IMA Active Managed Sector. The portfolio underperformed the benchmark over a four year period by about 2% pa. The reason I believe the portfolio with HL underperformed its bench was NOT bad luck or falling markets. It was POOR FUND SELECTION. But there is a curious thing here, Hargreaves Lansdown could have selected the best funds in each sector they chose to invest in. However, Hargreaves Lansdown did not invest in the best funds in each sector - they invested my money in their own funds. About 90% of the investment is held in HL Multi Managed Balanced & Special Situations which in itself is pretty high risk for a fund to take by putting all its eggs in one basket. But the question that has to be asked is why would Hargreaves Lansdown Asset Management make such a choice? One reason is that funds do pay intermediaries a trail back commission and that could be a sigificant factor in HL's decision to nvest in its won funds rather than those of third parties.
Issue 3: HL Funds I understand invest in other funds, so that can results in doubling running costs, if not tripling them. The active managed sector typically produces about 5% pa. So how can the expenses of running the three layers ever make sense? I refer to the expenses of running Hargreaves Asset Management client portfolios, the expenses of running the HL Managed funds and the funds in which they invest? (I make that around 3 X 2%)

When I pay for independent financial advice I expect it to be independent. ( I do not think it was ...). When an investment company invests my funds, I expect it to do the best it can ( I don't think it did.)

It would be useful to get some feed back from people on this site who had experience of Hargreaves Lansdown's IFA and Discretionary Services. I am not really interested in any responses from "saddos" who fail to grasp the points at issue and feel the need to launch insults from behind a computer screen.

sunil1234

PatrickGrant wrote: »

Some of the remarks made on the original post are not particularly helpful and show that one or two contributors have not grasped the issue at all. I assume they are HL Self Select SIPP investors and have little knowledge of Hargreaves Lansdown's Advisory and Discretionary Management Services. To put the issue into simpler terms:

>>> Issue No 1: I asked Hargreaves Lansdown for Independent Financial Advice on how to invest a significant sum of money. I was assured the advice was independent and have that in writing. My understanding is that this advice was paid for by a 3% commission. The advice was to invest the money on a discretionary basis with Hargreaves Lansdown Asset Managers. (If an Independent Financial Advisor does recommend their own employer's financial product, then that may or not be independent. It would depend on their basis for proposing it - which frankly I do not know yet.
>>> Issue No 2: When Hargreaves Lansdown Asset Management invested the money on my behalf, it was primarily invested in HL's own managed funds, not for example leaders in the same sectors. The benchmark for this portfolio is the IMA Active Managed Sector. The portfolio underperformed the benchmark over a four year period by about 2% pa. The reason I believe the portfolio with HL underperformed its bench was NOT bad luck or falling markets. It was POOR FUND SELECTION. But there is a curious thing here, Hargreaves Lansdown could have selected the best funds in each sector they chose to invest in. However, Hargreaves Lansdown did not invest in the best funds in each sector - they invested my money in their own funds. About 90% of the investment is held in HL Multi Managed Balanced & Special Situations which in itself is pretty high risk for a fund to take by putting all its eggs in one basket. But the question that has to be asked is why would Hargreaves Lansdown Asset Management make such a choice? One reason is that funds do pay intermediaries a trail back commission and that could be a sigificant factor in HL's decision to nvest in its won funds rather than those of third parties.
Issue 3: HL Funds I understand invest in other funds, so that can results in doubling running costs, if not tripling them. The active managed sector typically produces about 5% pa. So how can the expenses of running the three layers ever make sense? I refer to the expenses of running Hargreaves Asset Management client portfolios, the expenses of running the HL Managed funds and the funds in which they invest? (I make that around 3 X 2%)

When I pay for independent financial advice I expect it to be independent. ( I do not think it was ...). When an investment company invests my funds, I expect it to do the best it can ( I don't think it did.)

It would be useful to get some feed back from people on this site who had experience of Hargreaves Lansdown's IFA and Discretionary Services. I am not really interested in any responses from "saddos" who fail to grasp the points at issue and feel the need to launch insults from behind a computer screen.

i use h-l but as a self-invested option. What isnt clear is

1) Other than maybe warning other investors, what do you wish to acheive by posting on the forums?

2) Over this period, did you not have reviews of how your investments were performing and raising questions as to charging structures etc?

3) it is very easy to select the best funds with hindsight, how does anyone select them in advance?

thanks

jem16

PatrickGrant wrote: »

I assume they are HL Self Select SIPP investors

The majority of them will be using HL's Vantage for ISA and Funds - all DIY choosing their own investments. That is what HL are recommended on here for not their advice arm which is usually seen as expensive.

It would be useful to get some feed back from people on this site who had experience of Hargreaves Lansdown's IFA and Discretionary Services.

Very unlikely anyone on here will have used their DIM services.

I am not really interested in any responses from "saddos" who fail to grasp the points at issue and feel the need to launch insults from behind a computer screen.

Dunstonh has replied to you as to why the DIM service is completely different from an IFA service.

However on this thread and others you never reply to the points raised to you asking for clarification, i.e. how you claim to have made 30%pa with BestInvest and here you say something different. So basically it comes over as a rant against HL as opposed to someone genuinely looking for help.

You would perhaps get better help if you started answering some of the points put to you.

pressuredrop_2

You invested in 2006, in the two funds mentioned, and both of those funds were launched in 2001. Plenty of past perfomance for research.

You research the funds, you're happy with the funds, you invest.

If you thought the funds were not the best, and better funds were available, why did you invest in the funds?

PatrickGrant

It was Hargreaves Lansdown Asset Managers were fined. Their business is to take customer's money and invest it on their behalf. I assume they invested it in splits etc, then did not tell their customers the risks within their portfolio had been changed. There should be a contract between the manager and the customer to stipulate the the level of risk. That contract was effectively breached when HL decided to invest in more risky assets than agreed. I guess the value of those customer's investments seriously plummeted as a result. If I am correct, HL deserved the fine they got.

Lokolo wrote: »

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!)

jem16

PatrickGrant wrote: »

It was Hargreaves Lansdown Asset Managers were fined. Their business is to take customer's money and invest it on their behalf. I assume they invested it in splits etc, then did not tell their customers the risks within their portfolio had been changed. There should be a contract between the manager and the customer to stipulate the the level of risk. That contract was effectively breached when HL decided to invest in more risky assets than agreed. I guess the value of those customer's investments seriously plummeted as a result. If I am correct, HL deserved the fine they got.

However this has nothing to do with you.

As has already been said this was mainly sold by direct offer, not advice. It also refers to the period between 1992 and 2002, long before you invested.

Again, however, you ignore other points put to you that are relevant.

PatrickGrant

Replies to Dunstone's Comments:
*** The FSA report states that the product was mostly direct offer. Not advice.
>>> Not so. I have correspondence asking HL to offer advice and querying if it was independent. HL replied confirming of course it was independent. The advisor even drove all the way from Bristol to see me and get me to sign up for a contract (and it looks like without giving me a copy).:o
*** Discretionary management and IFA are two different things.
>>> I know that !!!
*** Forget independent advice. You have bought the HL service from HL.
>>> Not if I paid 3% commission for it on a lot of money !!! HL might want me to forget that though.
*** 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.
>>> I make that serious conflict of interest ... and regulatory authorities are there to ensure mal-practise does not occur.
*** 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
>>> I did use HL IFA. HL offer more than direct access services. They also offer Independent advice and Discretionary Fund Mangement. )I would question why the FSA licenses them to perform 3 potentially conflicting services.)
*** 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.
>>> Don't agree. HL failed to reach its benchmark which was the IMA Active Managed Sector Index for four consecutive years. That is enough time to iron out any blips or special cases. The chances of an average fund failing to reach sector average for 4 years are 0.125 (i.e. Not a lot). It is possible that was bad luck - but I doubt that. The real reason there is a big spread on that sector is that some funds put a significant chunk of money into a fast growing sector such as UK Smaller Cos. In effect, they are taking quite a risk but getting better returns than their competitors. Sadly, there is a lack of transparency over managed funds and the real risk level, especially if one fund invests in another, then another, then another which is what HL has also been doing.
>>> Talking of ironing out blips and how to create them. HL invested 90% of my funds in two of theirs. If there had been fraud at either, I and most of their other discretionay customers would have lost a fortune. Normal practise is to invest in a larger number of assets to reduce the risk. I am at loss to explain why HL thinks that is a good idea and why the FSA has allowed it. Or even why an independent advisor recommended it.

jem16

PatrickGrant wrote: »

Replies to Dunstone's Comments:
*** The FSA report states that the product was mostly direct offer. Not advice.
>>> Not so. I have correspondence asking HL to offer advice and querying if it was independent. HL replied confirming of course it was independent. The advisor even drove all the way from Bristol to see me and get me to sign up for a contract (and it looks like without gving me a copy).:o

Dunstonh stated that the fine to which you refer was for a product mostly sold by direct offer. Nothing to do with whether or not you asked for advice.

http://www.fsa.gov.uk/Pages/Library/Communication/PR/2004/052.shtml

This fine and this product has nothing to do with you, your advice or your investment.

The rest of your answers I'll leave to him.

PatrickGrant

There are a few points you are forgetting here....I had independent financial advice from HL to invest in an HL's Discetionary Fund services. It was HL who decided to invest in these two funds, not me. HL could have selected better investments than their own funds but chose not to do so.

==========================

pressuredrop wrote: »

You invested in 2006, in the two funds mentioned, and both of those funds were launched in 2001. Plenty of past perfomance for research.

You research the funds, you're happy with the funds, you invest.

If you thought the funds were not the best, and better funds were available, why did you invest in the funds?