Warning for people using Hargreaves Lansdown

Ark_Welder

thelawnet wrote: »

There doesn't seem to be any reason why, if the units are priced on a cancellation basis, they shouldn't discount below creation cost, but it seems they don't....Basically I guess the fund managers are not going to give you something for nothing by selling below cost, even if they do need your cash!

Obviously this is a bit of a pain if you are looking at H-L's prices, since they don't actually bother to quote the creation price.....

Why should the price be discounted below cost? To do so would be to the detriment of existing investors in the fund.

HL do have their sins, but does any other platform/fund provider show the creation price? Ditto for the following with regards to other up-front discount platforms:

They are making it cheaper to buy, but only for people buying it with full upfront commission. For those buying it discounted, it's effectively more expensive because with H-L you always buy at creation price

Although I fail to see the logic of how something that is bought at the same price is more expensive. I could agree if you had phrased it along the lines of 'the discount can be less-generous than it appears to be at first glance'.

thelawnet

Ark_Welder wrote: »

Why should the price be discounted below cost? To do so would be to the detriment of existing investors in the fund.

Well no, the point is that there are an imbalance of sellers and buyers and offering a discount is still better for existing investors than having their units cashed-in at the redemption price.

Although I fail to see the logic of how something that is bought at the same price is more expensive. I could agree if you had phrased it along the lines of 'the discount can be less-generous than it appears to be at first glance'.

It's more expensive because normally the sell price (i.e. what you can get for your units, in other words what they are worth) is somewhat higher the cancellation value, whereas the buy price is always the same as the creation value. If the sell price falls but the buy price stays the same, the investment is effectively more expensive, assuming the bid/offer basis stays the same.

Ark_Welder

So you're talking about investors selling their units now rather than them buying.

thelawnet

Ark_Welder wrote: »

So you're talking about investors selling their units now rather than them buying.

Well no.

If the buy price was double the sell you wouldn't want to buy. The price at which you can sell is very relevant to how much you buy it for.