H-L introduces a Tracker Platform Charge

gadgetmind

Titan_Uranus wrote: »

So, if i've got an ISA with H-L (Aberdeen Emerging what-ever), they are going to start charging me £2 a month?

You will start to see platform charges but should also see ongoing per-fund charges dropping. This will probably benefit those with larger investments but TBH the smallfry tend to stick to cash ISAs anyway as they see S&S as risky.

Apologies to everyone who's an exception to this rule!

jamesd

gadgetmind wrote: »

You will start to see platform charges but should also see ongoing per-fund charges dropping.

I doubt it. It's more likely that HL have been raising their charges for other funds without telling people, by reducing the rebates paid via the loyalty bonus.

competitionscafe

gadgetmind wrote: »

Only until RDR says otherwise, not if you flog and move as cash (as I'm currently doing though not from HL), and who cares if Bestinvest will pick up the bill!

TBH, that "we've got you and now we'll milk you" would cause me to move a SIPP away from HL, but I only use them for ISAs and shares.

Yes, I thought his comment 'warning' people who want to transfer that they will be charged was a bit cheeky.

Basically 'we added these charges with very little notice and if you don't like it and want to take your business elsewhere, well we will charge you to do that too'!

Also not sure how clients are "benefiting from their service without paying sufficient for it" - you can hold tracker funds direct with Fidelity or HSBC without any charges and if you only hold trackers you would not be interested in any of the research and info on managed funds HL offer anyway - so how exactly are they adding value with their service?

(apart from supplying you with free envelopes)

gadgetmind

competitionscafe wrote: »

Basically 'we added these charges with very little notice and if you don't like it and want to take your business elsewhere, well we will charge you to do that too'!

Perhaps they couldn't spell everyone's favourite evil laugh?

"Muhahahahahaha!"

(apart from supplying you with free envelopes)

Those envelopes aren't free: they are now paid for by those using HSBC trackers.

jem16

competitionscafe wrote: »

Also not sure how clients are "benefiting from their service without paying sufficient for it" - you can hold tracker funds direct with Fidelity or HSBC without any charges and if you only hold trackers you would not be interested in any of the research and info on managed funds HL offer anyway - so how exactly are they adding value with their service?

(apart from supplying you with free envelopes)

I expect they feel they are offering a service to those who want to hold trackers from a mixture of fund houses which you couldn't do by going direct if you were utilising an ISA.

I'm sure there will also be those who use both trackers and managed funds where appropriate.

koru

competitionscafe wrote: »

Also not sure how clients are "benefiting from their service without paying sufficient for it" - you can hold tracker funds direct with Fidelity or HSBC without any charges and if you only hold trackers you would not be interested in any of the research and info on managed funds HL offer anyway - so how exactly are they adding value with their service?

That's the big risk for the likes of HL. They are of course carrying out administration of purchasing the units and holding the units for the punter, but the punter could get this for no extra cost by going direct, as long as the fund manager is willing to reduce its charges by the amount of commission they would have paid to HL.

The real value that they are adding is being provided to Fidelity and HSBC, as they are delivering extra sales to Fidelity and HSBC. That's why Fidelity and HSBC are willing to share some of their AMC with HL, but following RDR implementation that is going to be more difficult. I wonder if the discount broker business model is going to be viable post-RDR. For the kind of punter who does not want advice, the main benefit provided by the discount brokers is that they are willing to rebate some of their commission, but this was only necessary because of the system where the fund manager charged an AMC that included an extra 0.5% in order to pay the commission. The only way to avoid paying this was (in most cases) to use a discount broker. In future this will no longer be a problem because the AMC will not include sales commission, so the discount broker has lost its main value proposition. In future, the discount broker is simply offering the convenience of a one-stop shop platform, but how much is the punter going to be willing to pay for this?

koru

jem16 wrote: »

I expect they feel they are offering a service to those who want to hold trackers from a mixture of fund houses which you couldn't do by going direct if you were utilising an ISA.

I'm sure there will also be those who use both trackers and managed funds where appropriate.

Perhaps in future we will have to decide whether we are willing to pay extra to have all of our investments held in one convenient platform or to have different holdings held directly with a range of different fund managers. HL currently apparently earns income equal to approximately 0.8% of the funds invested through it. Will most of us be willing to pay them this much as an explicit fee, or will many of us prefer to put up with the hassle of administrating lots of different fund holdings with different fund managers in order to save the fee that HL demands?

I suppose it depends how big your portfolio is. For a portfolio of £10,000, a fee of 0.8% is £80, and perhaps most of us would be willing to pay this in order to save a lot of administration hassle. But for a portfolio of, say, £200,000, 0.8% is £1600, which is a heck of a lot and I suspect there will be quite a few people who might balk at paying this as an explicit fee to HL and might prefer to start going direct to fund managers.

Or, they might switch to another cheaper fund supermarket, because it will now be much more obvious how much better off they would be if they switch from HL. Apparently Cofunds is planning to launch a new RDR-compliant fund supermarket next year which will charge a fee of 0.25% plus a flat fee of £40. HL is either going to have to accept something similar, which is going to mean a massive fall in its income, or it is going to have to come up with some pretty strong arguments as to why someone with a £200,000 portfolio should pay an extra £1000 to use the Vantage platform rather than the Cofunds platform.

jamesd

It's not necessarily the case that HL would have to accept a decrease in revenue, but perhaps in revenue per thousand Pounds held via the platform.

What HL and the other platforms are doing fundamentally is exploiting the restrictions in the tax wrappers and the friction in moving investments around. Their business and the costs it adds could be mostly eliminated if it was possible to easily move investments around between providers without a platform having to be involved.

It's fundamentally a business that should be eliminated if the FSA can find a way to modify things so that it is no longer necessary.

SnowMan

koru wrote: »

For the kind of punter who does not want advice, the main benefit provided by the discount brokers is that they are willing to rebate some of their commission, but this was only necessary because of the system where the fund manager charged an AMC that included an extra 0.5% in order to pay the commission. The only way to avoid paying this was (in most cases) to use a discount broker. In future this will no longer be a problem because the AMC will not include sales commission, so the discount broker has lost its main value proposition. In future, the discount broker is simply offering the convenience of a one-stop shop platform, but how much is the punter going to be willing to pay for this?

Things seem to be swinging full circle from direct to indirect and now back to direct.

That is certainly how I got into using the HL platform. Prior to that all my tracker funds were held with the providers direct (Fidelity, L and G and M and G at the time) but the HSBC tracker funds were only available at the 0.25% amc through HL.

It was interesting to see that HSBC are saying that they were paying commission to HL for the HSBC trackers. So HL's offering of the HSBC trackers wasn't the full-on freebie loss leader that we might have thought it was. HL wanted to keep that quiet. It is much more convenient for HL to mislead investors (through their secrecy and refusal to disclose commission being paid into them) into thinking HL were the good guys and getting no commission for the HSBC trackers. However the cat is out of the bag and hopefully will be meowing quite loudly. Not only are HL being paid by HSBC currently but they are greedy enough to now charge a platform fee on top, and seem oblivious to the damage that has been done to their name through the communication of all this.

It also means that there is money in the pot for (say) HSBC to offer the HSBC trackers through their own platform. The commission that they were paying to HSBC, is available for HSBC to put towards the costs of administering and marketing the holdings on their own platform.

I think the future outlook and the profitability of all the platforms apart from those like Fidelity and HSBC who offer their own funds is looking very bleak indeed. They can post RDR no longer effectively charge huge admin and marketing fees to the fund houses offering the funds.

The outlook for tracker investors looks distinctly better post RDR (even though some may or might have thought otherwise). Especially for those tracker investors who are quite happy to buy their funds direct. Roll on the RDR I say.

SnowMan

jamesd wrote: »

It's not necessarily the case that HL would have to accept a decrease in revenue, ut perhaps in revenue per thousand Pounds held via the platform.

What HL and the other platforms are doing fundamentally is exploiting the restrictions in the tax wrappers and the friction in moving investments around. Their business and the costs it adds could be mostly eliminated if it was possible to easily move investments around between providers without a platform having to be involved.

It's fundamentally a business that should be eliminated if the FSA can find a way to modify things so that it is no longer necessary.

You are quite right that one of the artificial advantages of platforms is the ability to switch easily between funds

I am in the process of switching from the HSBC trackers (non ISA) in HL to HSBC direct via their HSBC Global Investment Centre. The units were sold on Thursday but settlement isn't until next Wednesday. Then I have to move out the money to my bank account (another 3 days through BACS) and then reinvest via HSBC which will take another day at least. So we are talking on close to 2 weeks.

During this time funds are out of the market and so there is a loss of market returns (and subject to market movements) and even if I am able to cover the sale by buying the funds at the same time as selling (through other savings) I am losing about 2 weeks interest.

I was told by Fidelity that re-registering with their platform could take up to 6 months.

If I was switching between funds on the same platform it is pretty near immediate.

Compulsory fee free re-registration (a speeded up version) between platforms may help if it comes in plus some rules to deal with funds offered on one platform but not another (where re-registration is not possible).