Hagreaves Lansdown - Poor Independent Advice and Asset Management

dunstonh

1. The advise was to invest in the Discretionary Investment Management. Why ignore paid for advice?

Was it advice or was it a choice of options?
- Did the IFA factfind you, then provide a written report recommending their DIM service and the pros and cons of this or did the IFA just say you may be better off using their DIM service (no report = no advice)

jem16

PatrickGrant wrote: »

1. The advise was to invest in the Discretionary Investment Management. Why ignore paid for advice?

Mainly because 2 MM Funds doesn't sound much like a DIM service to me.

2. At that point, the DIM fund value was 26% less than I paid in. If I had changed in a period of volatility I could have lost even more.

Fair enough. Presumably though at some point it had increased since you invested. You said that with BestInvest it helped when you pulled out before the decline and paid back in later - that was more my point.

3. I don't think there is afact sheet for the DIM fund, but there are for Funds it invests in....

There are various fact sheets and reports for the 2 MM Funds, such as;

http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/Documents.aspx?type=packet_fund_doc_reports_and_accounts&user=hl_web_test&sedol=3028106

and

http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/Documents.aspx?type=packet_fund_doc_reports_and_accounts&user=hl_web_test&sedol=0589048

LongTermLurker

1. The advise was to invest in the Discretionary Investment Management

Surely you don't invest in a service? You might have invested using the DIM, but not in it - that would imply you would make profits based on HL's service charges to others?

Mainly because 2 MM Funds doesn't sound much like a DIM service to me.

Agreed!

PatrickGrant wrote: »

3. I don't think there is afact sheet for the DIM fund, but there are for Funds it invests in....

"Discretionary Investment Management" isn't a fund, it's a service or function - presumably that's why there are no fund fact sheets for it? It's like saying there's no fact sheet for the ISA or SIPP wrappers; they're simply not investments in their own right.

The underlying funds, surely, are the important bits?

Richard_DandR

PatrickGrant wrote: »

Answers:

>>> If the selections were funds investing in other funds there was a double layer of costs - say 4% assuming average TER of 2%. That kills growth and HL must reasonably have known it, it is merely a way of HL getting 80% of fund growth.

The TER for the HL MM Special Situations Trust is 2.11% and the Balanced Trust TER is 1.91%. They rebate some of the underlying fund's annual charge.

http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/Documents.aspx?type=packet_fund_doc_reports_and_accounts&user=hl_web_test&sedol=3028106

http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/Documents.aspx?type=packet_fund_doc_reports_and_accounts&user=hl_web_test&sedol=0589048

BadgerIOW

If you're going to invest via managed funds then HL seem to be as competetive as any other, fees are a fact of life, when you invest in a managed fund you're effectively buying the fund managers expertise at stock picking so companies will always charge for that, HL like any other are also in business to make money so will look to charge where they can, as an investor its up to you to keep an eye on the overall expense ratio of any investment and take it into consideration when investing. I use HL for my self select ISA but am open to suggestions if anyone has a better like for like service! I'm building a portfolio of managed funds and individual stocks so like it for the ease of use and management of having it all together.

Where I do have reservations with regard to HL and more in line with this thread is their Portfolio Management Service, I have not used it but my parents have. When my parents first invested HL structured the portfolio with a reasonably broad range of funds and bonds to reflect the risk profile (low), over the last couple of years the number of investments has gradually decreased until the bulk of their funds were held in the HL MM Inc & Growth Fund and the HL Strategic Bond with Blackrock UK Absolute Alpha and Cazenove UK Absolute Target making up a small % to complete the holdings. Now I know more funds doesn't necessarily mean better but this strikes me as a little narrow and as if HL and only paying the portfolio lip service by holding their own MM funds as the bulk holding.

dunstonh

Where I do have reservations with regard to HL and more in line with this thread is their Portfolio Management Service, I have not used it but my parents have. When my parents first invested HL structured the portfolio with a reasonably broad range of funds and bonds to reflect the risk profile (low), over the last couple of years the number of investments has gradually decreased until the bulk of their funds were held in the HL MM Inc & Growth Fund and the HL Strategic Bond with Blackrock UK Absolute Alpha and Cazenove UK Absolute Target making up a small % to complete the holdings. Now I know more funds doesn't necessarily mean better but this strikes me as a little narrow and as if HL and only paying the portfolio lip service by holding their own MM funds as the bulk holding.

You are right to be concerned. If they wanted to utilise investment funds then they may as well have used an IFA. If you use a discretionary investment manager you do not expect investment funds to be used heavily. You expect shares, gilts, investment trusts, ETFs etc. in other words, direct investments. You sometimes get a small spread of unit trusts in areas that perhaps they offer the best option.

A discretionary investment manager using unit trusts is just adding another layer of charges.

BadgerIOW

When they first invested I wasn't comfortable in having the responsibility of having to run their portfolio as well as my own so thought it would be best left in the hands of professionals, its only as I've become a bit more savvy and started using IT's, ETF's and shares in my own portfolio have I come to see HL's advice as somewhat lacking and a lot of the comments on this site have served to back up my thinking.

They've now taken the decision to take their money out of the PMS and go down the DIY route and hold the funds with HL in a 'Vantage' account unless I can come up with a better deal. I'm sure there will be a thread on here in relation to the best fund supermarket/broker service to use so best I get searching!

PatrickGrant

Badger

Thanks for your reply. I was interested in the part of your your reply about your parents' fund with HL and its poor performance. This is the only reponse I have had on HL's Discetionary Investment Management. Please could you let me know:

1. Did your parents fund achieve its benchmark?
2. The pattern you mention is what concerns me because:
3. Fewer investments means greater risks. What if something went wrong with HL funds? Someone's savings could easily be wiped out...
4. The increased cost aspect means HL and others get most of the growth..something like HL gets £2s for every £1 the customer gets. A low return fund cannot stand higher charges and this potentially amounts to mis-selling and an entitlement to compensation. HL must reasonably have known about this when the IFA recommended these funds.

It seems your parents might have been better off to put their money into a Building Society or under the bed. ;o)

PatrickGrant

BadgerIOW wrote: »

When they first invested I wasn't comfortable in having the responsibility of having to run their portfolio as well as my own so thought it would be best left in the hands of professionals, its only as I've become a bit more savvy and started using IT's, ETF's and shares in my own portfolio have I come to see HL's advice as somewhat lacking and a lot of the comments on this site have served to back up my thinking.

They've now taken the decision to take their money out of the PMS and go down the DIY route and hold the funds with HL in a 'Vantage' account unless I can come up with a better deal. I'm sure there will be a thread on here in relation to the best fund supermarket/broker service to use so best I get searching!

Badger
You might want to think about using Bestinvest. I have asked Bestinvest to come up with suggestions for a small commission and that has woked quite well, unlike HL.
I thnink your parents did the right thing by withdrawing form HL Dscretionary funds. I would also suggest your parents ask HL for compensation on the basis that the Discretionary Funds levy charges higher than the fund can support. HL must know that this set of arrangements is not viable and it works out HL get £2 for every £1 your parents get. In my case, the notional loss of falling short of the benchmark is about £5K and worth asking for. I honestly think HL is mis-selling and I may ask the FSA to look at the issue further. I don't mind paying charges providing I get value for money. HL has not proved to be value for money at all. All it has been is a nice little earner for HL.

dunstonh

The increased cost aspect means HL and others get most of the growth..something like HL gets £2s for every pound the customer gets. A low return fund cannot stand higher charges and this potentially amounts to mis-selling and an entitlement to compensation. HL must reasonably have known about this when the IFA recommended these funds.

As has been said, an IFA did not recommend the funds. The discretionary investment manager did. Its a different type of service.

I have asked Bestinvest to come up with suggestions for a small commission and that has woked quite well

Best invest is an IFA service, not a discretionary investment management service (at least what you are using). They are just doing what most other IFAs would be doing. No problem with that at all but you do need to be aware that a DIM service and an IFA service are two different things.