H-L introduces a Tracker Platform Charge

SnowMan

koru wrote: »

I agree that they have handled this badly by sneaking the information out. And I agree that they seem to have been sending mixed signals, on the one hand pointing out all the arguments against trackers and on the other hand offering a deal that must've been loss-making for them. I suppose they must've been hoping that most of the people who bought trackers also bought lots of active funds with juicy trail commission. Perhaps they did an analysis and found that this was not happening as often as they had hoped.

I can see it must be disappointing to anyone who was counting on HL to continue offering this deal. I suppose I am just such a cynic that I always expected them to make a change like this sooner or later.

Yes I think that is a very good summary of things.

I've been investing in trackers for close to 20 years since L and G introduced their 0.5% amc tracker and I've never seen my charges go up before. I've seen charges go down such as when Fidelity slashed their AMC to 0.1%.

So it is all the more of a shock when you get hit by something like this, and the way they have tried to sneak it in and give such short notice was bound to annoy.

Unlike you I never really considered that HL would ever increase the fees on trackers. Even when others on this forum were talking about the RDR and its effects, I thought the HL fees would come in after RDR not before and we'd get plenty of notice.

In hindsight I should have seen it coming based on some of the ruthless HL practices such as their promotion of the Wealth 150. That said I am not sure their decision to get in early with their first set of increases makes commercial sense.

No real damage done for me as switching existing holdings to both the new HSBC platform and Fidelity leaves me paying the same charges and in a fairly good position to avoid future charge increases (but no complacency this time).

Lesson learned, perhaps think a bit more carefully why an investment is being offered at a low cost and is it sustainable for them to offer at that cost.

gadgetmind

SnowMan wrote: »

Lesson learned, perhaps think a bit more carefully why an investment is being offered at a low cost and is it sustainable for them to offer at that cost.

TBH, moving ISAs and even pensions, is already quite easy, and is going to get even easier post-RDR.

It's going to end up like savings accounts: sit still and get ripped off.

competitionscafe

SnowMan wrote: »

Only downsides of the HSBC Global Investment Centre seem to be you can't transfer ISAs in (currently) and you have to invest by lump sum, minimum £500 (no regular contributions).

From this article (regarding transfers):

"I'm also looking at another interesting option. One of the things being said in some of the Internet forums is that HSBC Global Asset Management (the part of the bank that actually sells the trackers) doesn't offer an ISA.

That's not so. It does -- and what's more, it's free. And for investors starting from scratch, it seems quite tempting. No wrapper fee, no platform fee -- and low-cost HSBC trackers to boot.

ISA transfers, though, are another matter, with the small print seemingly requiring investors to transfer as cash, and be out of the market while the transfer is taking place -- and for a period of up to 30 days.

I've asked HSBC for an explanation about this, and will report back when I get it -- which could be as soon as later today. If so, I'll add a comment to this article, detailing HSBC's response."
http://www.fool.co.uk/news/investing/2011/11/22/hargreaves-lansdown-drops-a-tracker-bombshell.aspx

A further comment was then added:

"Since publishing this article, I've taken calls from senior individuals at both HSBC and Vanguard.

HSBC are urgently looking at what can be done to make ISA transfers of HSBC trackers easier and speedier, ideally without going into cash. And I'm told that they're taking quite a few calls about new business."

Also re the Vanguard funds on HL - "In short, the situation is that there are discussions, but no deal yet."

Another comment mentions that the Vanguard funds can be accessed via Sippdeal for a flat £12.50 / quarter (£50 per year) for holding any number of Vanguard funds.
http://www.fool.co.uk/news/investing/2011/11/22/hargreaves-lansdown-drops-a-tracker-bombshell.aspx

SnowMan

gadgetmind wrote: »

TBH, moving ISAs and even pensions, is already quite easy, and is going to get even easier post-RDR.

It's going to end up like savings accounts: sit still and get ripped off.

Sadly I think you are right. Even if compulsory free re-registration of investments comes in through legislation that only works if people hit by big fee increases actually switch.

There will be 'platform tarts' that keep moving but there will be many others who don't switch and get caught out.

It will be pretty unsatisfactory if that happens (looking at it from the wider is it a good thing perspective rather than the individual platform tart perspective).

Hopefully, looking at it optimistically (and perhaps naively) once RDR has come in and the fee increases have all taken place, we will return to a position of charges staying constant over time.

gadgetmind

SnowMan wrote: »

It will be pretty unsatisfactory if that happens (looking at it from the wider is it a good thing perspective rather than the individual platform tart perspective).

I tend to agree, but I think we'll see some platforms being better/worse for different size pots, ISAs versus SIPPs, funds versus trackers versus shares/ITs/ETFs, so it won't be quite the mad stampede that we see whenever a slightly better rate savings account comes along.

Also, I'm prepared to pay a little bit more (flat not percentage!) to get better service, so maybe we'll see gold, silver and bronze classes of platform fees? Pay a bit more and you get through to someone with brain cells in the UK rather than the 'phone queue to get through to the Indian call centre.

koru

I wonder if RDR is going to see HL experiencing a sudden revelation about the arguments for trackers? If they have to start charging separate stand-alone fees for all investments, it would seem to make sense that they would charge the same fee for holding a passive fund as an active fund. So, all of a sudden there will be no incentive for them to push active funds in preference to passive funds.

It's going to be amusing watching them suddenly start being more enthusiastic about trackers without admitting their previous scepticism was in any way influenced by commission considerations. Kind of like the way they have always been against investment trusts until one, the Anthony Bolton Fidelity investment trust investing in China, started paying commission and all of a sudden HL lost their previous scepticism about investment trusts.

SnowMan

competitionscafe wrote: »

One of the things being said in some of the Internet forums is that HSBC Global Asset Management (the part of the bank that actually sells the trackers) doesn't offer an ISA.

That's not so. It does -- and what's more, it's free. And for investors starting from scratch, it seems quite tempting. No wrapper fee, no platform fee -- and low-cost HSBC trackers to boot.

They certainly do offer an ISA wrapper. I should know as I invested this year's allowance with the HSBC Global Investment Centre today (HSBC 250 index tracker):rotfl:

Will also be investing non-ISA funds I had with HL once the sale of these has been settled.

What they can't do is currently transfer existing ISAs into the Global Investment Centre. However expect this to change very shortly.

Well impressed with them.

Would thoroughly recommend the Global Investment Centre, see some of my other posts on this.

The on-line system for investing is extremely well thought out and brilliantly designed. The information on each fund is so clearly set out.

The need for an HSBC account to act as a settlement account is actually a real advantage although it might seem like a bit of a faff to set it up. You can zip money in through faster payments and then invest immediately.

Rollinghome

koru wrote: »

In the article in Investment Times they say they will write to anyone who holds funds on which the platform charge will apply, if the funds are other than those listed in the article. However, they should have done this first, then publish the article just to make sure everyone knows the new situation.

If they’re going to write to everyone effected they’re leaving it awfully late. Confusing that they should publish two lists there, one entitled “Tracker Funds” and the other “Other Funds” yet neither list mentions the Lindsell Train fund referred to by dach. It’s now unclear how many other funds could be effected but not on those lists.

Finding out at some point that although their fund wasn’t listed that they’ll still be charged won’t overly impress the clients affected. Odd too, that that fund isn’t particularly well known so not huge demand and they were presumably satisfied with whatever commission they got from it when it was listed. What changed?

As you suggest, will be interesting to see how price sensitive clients are. The real problem for them is that post RDR their current business model will have been demolished. It’s difficult to see how any new one will give them the same advantages over the competition they currently enjoy.

If they introduce a flat rate charge to replace trail commission that could well suit a lot of bigger investors but could also reduce HL’s profits. If they’re obviously uncompetitive on price, they may keep a lot of their old business due to inertia but not be the obvious choice for new business as they are now. Being uncompetitive is trickier with influential sites like MSE than it was.

I’d think that Best Invest is a bigger threat to them than Cavendish and ATS unless those two make their presentation more customer friendly. And I see Nicola Horlick is now talking about her previously shelved beesandhoney.com fund-supermarket project again – should be interesting if nothing else.

I don’t think there’s any doubt that HL will introduce Vanguard funds if there’s demand but it could be post RDR. With the ending of commission and marketing fees, investment in any fund should be of equal value to them, the whole point of RDR. Which makes their moves at this point to peeve the holders of currently unprofitable funds and create uncertainty difficult to understand. Maybe it will all become clear.

Rollinghome

koru wrote: »

Kind of like the way they have always been against investment trusts until one, the Anthony Bolton Fidelity investment trust investing in China, started paying commission and all of a sudden HL lost their previous scepticism about investment trusts.

Nigel Dampier (edit, or even Mark Dampier) was publicly rubbishing the announcement of the FCSS fund right up to the point when Fidelity decided to pay them commission and marketing fees:

'Yesterday, Mark Dampier, the Hargreaves Lansdown head of research, repeated his concerns over the fund being offered in a closed-ended structure.

He said: “It only gives you a limited window to invest in what is a more complex structure. You also have to deal with the fact that it will probably launch at a premium, so you probably won’t want to buy at launch and wait for a later date, and Anthony has only committed to two years on the fund.”'

http://www.trustnet.com/News/Displaystory.aspx?id=56947 You gotta love him.

SnowMan

koru wrote: »

I wonder if RDR is going to see HL experiencing a sudden revelation about the arguments for trackers? If they have to start charging separate stand-alone fees for all investments, it would seem to make sense that they would charge the same fee for holding a passive fund as an active fund. So, all of a sudden there will be no incentive for them to push active funds in preference to passive funds.

It's going to be amusing watching them suddenly start being more enthusiastic about trackers without admitting their previous scepticism was in any way influenced by commission considerations. Kind of like the way they have always been against investment trusts until one, the Anthony Bolton Fidelity investment trust investing in China, started paying commission and all of a sudden HL lost their previous scepticism about investment trusts.

I think the whole investment industry not just HL will suddenly look more favourably on trackers.

To me it is why what is happening through RDR is so important in cleaning up the financial services industry.

It also shows the importance of RDR not just being applied to IFAs but also to platforms. If it didn't apply to platforms we would continue to see the commission biased comments from HL, whether it be about trackers. investment trusts or the Wealth 150.

We see so much nonsense about trackers being a second best option for lazy investors. Invariably the comments are made from a commission bias or from the indoctrination over many years of literature produced by those with a commission bias.

Now it is important to say that passive investing is not better than active investing. It is a matter of choice. You look at the evidence on whether active investing works, and take your own view. I guess if you think active investing works but you don't have the skills to take advantage of that then passive investing is second best. But otherwise it is for each to make their own decision on it. Perhaps we will now see some more truly independent views on whether active or passive is best.