H-L introduces a Tracker Platform Charge

dunstonh

Not had a chance to read the letter fully yet. They said they took my email as a "formal complaint" cos of FSA rules or something. If there's anything interesting to report I'll let you know.

An expression of dissatisfaction should be handled as a complaint using the FSA regulated process.

evilplan

Ah that makes sense - my brief look at the letter seemed to say something like that. Thanks. It looks like a very detailed letter, probably a standard one, but a company like HL wouldn't have got where it was if it didn't know how to weather storms.

King_Of_Bling

Couldn't be bothered to read the 20+ pages, so this list might have been posted before?

Hargreaves Lansdown monthly charges:-

New charges on affected funds

- Trackers

Fidelity MoneyBuilder UK Index £2

Henderson UK Index £2

HSBC American Index £2

HSBC European Index £2

HSBC FTSE 100 Index £2

HSBC FTSE 250 Index £2

HSBC FTSE All-Share (Retail) £2

HSBC Gilt & Fixed Interest £1

HSBC Japan Index £2

HSBC Pacific Index £2

Legal & General All Stocks Gilt Index Trust (I) £2

Legal & General All Stocks Index Linked Gilt (I) £2

Legal & General European Index (Class R) £1

Legal & General Fixed Interest (Class R) £1

Legal & General Global Emerging Markets Index £1

Legal & General International Index Trust (R) £1

Legal & General Japan Index (Class R) £1

Legal & General Managed Income (Class R) £1

Legal & General Pacific Index (Class R) £1

Legal & General UK 100 Index (Class R) £1

Legal & General UK Index (Class R) £2

Legal & General US Index (Class R) £1

M&G European Index Tracker (Class A) £2

M&G Gilt & Fixed Interest (Class A) £2

M&G Index Linked Bond (Class A) £2

M&G Index Tracker (Class A) £2

- Other funds

Aviva Inv Higher Income Plus (Class 1) £1

Fidelity MoneyBuilder Global £1

Fidelity Portfolio £1

GAM UK Diversified £1

Henderson All Stocks Credit (Class A) £1

Henderson Index Linked Bond (Class A) £1

IFDS Brown Shipley Sterling Bond £1

Royal London Index Linked Gilt £1

Standard Life Inv Global Index Linked £1

Templeton Global Total Return Bond (A GBP) £1

Rollinghome

King_Of_Bling wrote: »

Couldn't be bothered to read the 20+ pages, so this list might have been posted before?

Hargreaves Lansdown monthly charges:-

Is that from their advertising or the website because unfortunately it isn't a full list. The only way afaik to know whether the funds you have are affected is to check out the new key features for each of those funds. Which is the cause of some of the annoyance.

Broadly speaking, it seems that any fund with an AMC below 1.00% will know carry an extra charge.

King_Of_Bling

Rollinghome wrote: »

Is that from their advertising or the website because unfortunately it isn't a full list.

It's from thisismoney.co.uk , as you say people should double check the key facts of their own fund(s).

SnowMan

I was just looking at the FSA website at the documents on RDR and noticed from CP11/26 that it looks like Hargreaves Lansdown will continue to be able to receive their 0.1% commission from HSBC (figure assumed from press comments from HSBC) for existing funds in HSBC trackers after 31st December 2012, they call this legacy commission.

That is, if someone has say 20K already invested in an HSBC tracker via HL at 31st December 2012 then the legacy commission on that 20K fund can continue to HL indefinitely.

So the introduction of the platform fee not only results in double charging up to 31st December 2012 but it also results in double charging after 31st December 2012.

So it is not just a case of HL getting in quick with the platform fee to replace their HSBC 0.1% commission after 31st December 2012, because their legacy commission continues after 31st December 2012 so they will get both commission and platform fee both before and importantly after 31st December 2012.

So really the introduction of the platform fee it an arbitrary increase in charges for HSBC trackers nothing directly to do with RDR.

Having said that it is unrelated to RDR, I can see that it might be difficult for them administratively to have separate charging for new money into the HSBC trackers after 31st December 2012 (where commission from HSBC to HL is banned), to the charges for pre 31st December 2012 investments.

However if they eventually set their platform fee to make new investments in the HSBC tracker funds after 31st December 2012 profitable, and then they apply that to pre 31st December 2012 funds also, effectively all the legacy commission they are currently receiving is a windfall profit to them as their required profit is already being achieved through their platform fee.

I have an individual complaint with HL which I will take to the Ombudsman mid January about their refusal to waive the re-registration fee after their arbitrary and major increase in charges by introduction of the platform fee.

However I am now going to send in a response as an individual to the FSA document CP11/26 (deadline is 16th January 2012) to say that platforms should not be allowed to continue to get commission on pre 31st December 2012 business if they have added platform charges at any point since investments were taken out, or else ruthless companies like HL will exploit the loophole in the legacy rules. I would urge anyone else who feels similarly to do the same and reply to that document.

dunstonh

I was just looking at the FSA website at the documents on RDR and noticed from CP11/26 that it looks like Hargreaves Lansdown will continue to be able to receive their 0.1% commission from HSBC (figure assumed from press comments from HSBC) for existing funds in HSBC trackers after 31st December 2012, they call this legacy commission.

The platform review timescale is now out of sync with the RDR. The FSA want to ban commissions and marketing payments but doesnt yet know how the best way to do it is. So, it has pushed the platform review back.

I heard the other day in passing (so may not be accurate as it was third party) that Schroder have said that they plan to have just one retail share class for their funds as it will be too expensive to have multiple classes for different platforms. They are going to issue a clean class with charges reflecting no commissions being paid to anyone.

Fund houses though have been fairly quiet on the subject. Especially when you consider that they are going to have to issue a new share class next year at the latest.

Rollinghome

SnowMan wrote: »

So really the introduction of the platform fee it an arbitrary increase in charges for HSBC trackers nothing directly to do with RDR.

Would agree that the new charges have nothing to do with RDR and rather seem to be despite it. Post RDR they'll get no more from the funds that currently pay them commission etc. than from those that don't so their timing for this was intriguing.

What will their new charging structure be? Will they charge just £2 a month for all their funds? Somehow I doubt it without a huge fall in income. If they can't charge different rates for different funds, how will they justify raising the charges for trackers again?

Will also be interesting how the fund houses move. Presumably if they move first to end commission on funds they'll lose business from IFAs but if they're in the rear they'll lose business from the DIYers.

grey_gym_sock

Rollinghome wrote: »

What will their new charging structure be? Will they charge just £2 a month for all their funds?

my guess (i have no inside knowledge) is that that is exactly the charging structure that H-L are planning on using if the FSA sticks to its guns (as i hope it will!) and bans the commissions which give H-L most of its current income. i think these charges for trackers are a bit of experiment for H-L, because they will need something of this kind for all funds. but whether the charge would still be £2, or something higher, i don't know ...

the new CEO was talking a while ago about how H-L has in the past reduced its margins, but simultaneously increased its volume of business sufficiently that profits still rose, so that may be their plan again.

doubtless if they do increase the platform charge from £2, they will blame the FSA .

(full disclosure: i own some shares in H-L.)

dunstonh

the new CEO was talking a while ago about how H-L has in the past reduced its margins, but simultaneously increased its volume of business sufficiently that profits still rose, so that may be their plan again.

If they are making around 0.8% p.a. on assets under management and that is switched off for new business in two stages (0.5% turns off in 2013 and 0.3% turns off a year later), then £2 pm isnt going to do much to replace that.

Many of the platforms that have moved to unbundled models work on a percentage basis that is tiered based on amount invested with the platform. The tiering tends to penalise small investors as they have to pay their way as the big investors are no longer cross subsidising them (or to a much lower level).

If you run a platform that is too heavy on low value holdings then you are going to have to price them higher in future.