We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Consumer Panel says FSA should ban all platform rebates
Comments
-
‘It is just something that does not happen in any other sphere of commerce,’ he said. ‘The end consumer wants to buy beans - they don’t care what margin the retailer has.’
To be fair... that is true! A lot of the comments on the article saying "Yes of course we do!", yet I don't know anyone thats gone into supermarkets and not bought something because of the margins....0 -
What I don't get is that the hidden rebates are being paid for by the consumer in the TER. If the hidden rebates are removed, the TER will come down. If HL want the fund house to keep paying the rebate AND the trail commission, then that will have to remain in the TER. So, all consumers would end up paying for the rebates to HL even if they are not using HL.
Plus, HL are not the biggest platform. So anything they can get, can be matched or even trumped elsewhere.
I am not going to knock HL's model as it was highly profitable pre RDR and it did give consumers a good alternative. Their marketing is a bit off at times and their promotion of being cheap is often inaccurate. However, there does appear to be some arrogance in Peters press release that HL should continue to get rebates.
I think he is right on one point though. Most consumers want to know what they are paying but are not really concerned with the breakdown of who gets what. If you buy a washing machine, you look at the price. Not what each company or person in the chain is earning out of it. That said, increasingly I am finding the larger investors are more interested in knowing what the costs are for each element. Smaller investors dont tend to give two hoots.To be fair... that is true! A lot of the comments on the article saying "Yes of course we do!", yet I don't know anyone thats gone into supermarkets and not bought something because of the margins....
It matters more to advisers as the platform cost can be a significant chunk of the bottom line cost. Remember we can use multiple platforms from across the market. Cost is part of the equation. The comments in the thread are likely to be mostly advisers (as its the adviser part of citywire). So, that explains why there are so many "cost matters" responses.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
To be fair... that is true! A lot of the comments on the article saying "Yes of course we do!", yet I don't know anyone thats gone into supermarkets and not bought something because of the margins....
I'm not sure the analogy is particularly helpful.
If I'm paying an annual fee to a fund manager, I'd like to know what percentage they are spending on managing my money and how much they are paying to the glitzy salesman who told me what a great fund it was while all the time very carefully not offering advice that I should actually buy it.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »I'm not sure the analogy is particularly helpful.
If I'm paying an annual fee to a fund manager, I'd like to know what percentage they are spending on managing my money and how much they are paying to the glitzy salesman who told me what a great fund it was while all the time very carefully not offering advice that I should actually buy it.
Why though? If you are happy with the cost of your fund, why worry about where it goes?
It's just consumer demand, if the price is right, it doesn't matter how much they are spending on things such as marketing or IT services.
You don't want to know how much Asda spends on their television adverts, or how much they spend on putting brochures into newspapers for marketing when you buy a can of beans, so why do you want to know the same for your investments?0 -
Why though? If you are happy with the cost of your fund, why worry about where it goes?
Because I'm not particularly happy with the cost of any of the funds I hold, which is why I hold so few. The argument goes that managed funds are worth paying the extra for as the money goes into active management. If instead it goes in undisclosed kick backs, then I'd actually like this to be, 1) disclosed, 2) ideally to stop!
If these means that the AMC/TER on funds comes down, and I instead pay HL 0.5% capped at £45 pa for funds as well as other investments, then so be it.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I think the biggest issue is that to a lot of people the price is far from right. A typical actively managed fund probably takes about 0.65% of the value per year to manage. The rest of the AMC, which I'll assume to be 1.5% for this example, is therefore paid to 3rd parties for the provision of certain services. The platform charge, probably around 0.35%, is paid to whichever company provides the means to invest and the administration of that investment. The trail commission is supposed to be for the provision of ongoing advice, and usually makes up 0.5% of the AMC. As such, someone looking in at this could very reasonably state that if they're not receiving advice they shouldn't be paying the full AMC, which I feel is a fair comment. The cost of advice could (or should) be stated as an additional cost above and beyond the AMC, which in all cases could (or should) be reduced by the cost of that trail commission for non-advised cases.Why though? If you are happy with the cost of your fund, why worry about where it goes?
It's just consumer demand, if the price is right, it doesn't matter how much they are spending on things such as marketing or IT services.
You don't want to know how much Asda spends on their television adverts, or how much they spend on putting brochures into newspapers for marketing when you buy a can of beans, so why do you want to know the same for your investments?
The fact that HL are keeping large chunks of the trail commission is not widely understood, with many people genuinely thinking they're offering these funds at the cheapest possible price. The fact that they don't discount their SIPP AMCs at all is also a source of some outrage (especially when they answer questions as to why with answers like "it's not allowed under current tax law" despite a number of their competitors happily doing so already).
If I wasn't in the middle of changing jobs, I'd probably move away from HL to providers which rebate trail commission more, as I'm now at the stage where it's costing me a reasonable amount each year to stay with them.I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
The fact that they don't discount their SIPP AMCs at all is also a source of some outrage.
No outrage here: I simply don't have a SIPP with them and never will unless they mend their ways.
It's all about informed choice, and the more information I have, the better choices I'll make. Hopefully!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Well, the SIPP can be one of the cheapest on the market if you use it to gain access to the HSBC trackers rather than using managed funds. 0.25% AMC on the full range, which isn't too bad at all.gadgetmind wrote: »No outrage here: I simply don't have a SIPP with them and never will unless they mend their ways.
It's all about informed choice, and the more information I have, the better choices I'll make. Hopefully!
Bit of a waste of a SIPP, though, I'd agree!I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
Well, the SIPP can be one of the cheapest on the market if you use it to gain access to the HSBC trackers rather than using managed funds. 0.25% AMC on the full range, which isn't too bad at all.
I've looked at holding their trackers, but I have a sneaking suspicion that they'll change the fee structure of these at some point. That point will probably be just as I've gone to the effort of setting it all up!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I think the biggest issue is that to a lot of people the price is far from right. A typical actively managed fund probably takes about 0.65% of the value per year to manage. The rest of the AMC, which I'll assume to be 1.5% for this example, is therefore paid to 3rd parties for the provision of certain services. The platform charge, probably around 0.35%, is paid to whichever company provides the means to invest and the administration of that investment. The trail commission is supposed to be for the provision of ongoing advice, and usually makes up 0.5% of the AMC. As such, someone looking in at this could very reasonably state that if they're not receiving advice they shouldn't be paying the full AMC, which I feel is a fair comment. The cost of advice could (or should) be stated as an additional cost above and beyond the AMC, which in all cases could (or should) be reduced by the cost of that trail commission for non-advised cases.
The fact that HL are keeping large chunks of the trail commission is not widely understood, with many people genuinely thinking they're offering these funds at the cheapest possible price. The fact that they don't discount their SIPP AMCs at all is also a source of some outrage (especially when they answer questions as to why with answers like "it's not allowed under current tax law" despite a number of their competitors happily doing so already).
If I wasn't in the middle of changing jobs, I'd probably move away from HL to providers which rebate trail commission more, as I'm now at the stage where it's costing me a reasonable amount each year to stay with them.
M&S and Waitrose are overpriced too but people still go there, because they are happy to pay that price. If they weren't, they'd do what any normal person would do, and go elsewhere.
It doesn't matter how much the profit margins are, just matters the price you pay. As you've said in your last sentence, you don't like the cost, so you'd go elsewhere, thats what we get in a normal market is it not?
gadget mind has already said he doesn't like the cost hes paying and yet won't move? He (sorry if you are a she!) has said he wants to know where all his money is going and the FSA is making them do it, how would it be if every consumer market had to declare where every penny of their products goes to? I would imagine there would be outrage at some of the high end stuff such as Waitrose/JL and M&S, but consumers don't NEED to know this stuff, just know how much they are paying, which they do as the info is on the fund pages.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.1K Banking & Borrowing
- 253.5K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245.1K Work, Benefits & Business
- 600.7K Mortgages, Homes & Bills
- 177.5K Life & Family
- 258.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards