H-L introduces a Tracker Platform Charge

gadgetmind

dunstonh wrote: »

You need to remember that the Cofunds platform is bundled and will be banned by the FSA platform in its current guise.

What unbundled SIPP platforms are currently available to direct customers?

westy22

The RDR is being designed by the FSA to 'protect' the ignorant, unaware and 'couldn't cares' from themselves and their own folly - and it is the increased cost for money-savers and the financially aware that is paying for it! The FSA will tell us that we few have to accept these additional costs to benefit the many. Gives you a warm feeling inside, doesn't it? :mad:

dunstonh

What unbundled SIPP platforms are currently available to direct customers?

I dont know. I dont follow DIY options apart from what i see here.

The RDR is being designed by the FSA to 'protect' the ignorant, unaware and 'couldn't cares' from themselves and their own folly - and it is the increased cost for money-savers and the financially aware that is paying for it! The FSA will tell us that we few have to accept these additional costs to benefit the many. Gives you a warm feeling inside, doesn't it?

The FSA wants to make sure that that the cost of supply and distribution (advised or non advised) is not factored into the cost of the investment. The idea is sensible and correct. However, you highlight the problem that it creates to those that do spend time and take advantage of loss leaders.

So, effectively you should end up with three sets of charges

1 - adviser or distributor
2 - platform
3 - investment

1 - should be eliminated if you are not using an adviser although the distributor will have an add on charge if they dont run their own platform but use someone elses (although "own" platforms are likely to add on distributor charges as they will become responsible for some things that incur cost)
2 - the platform charges should be the same whether you use shares, funds (commission or non commission) other than specific trading charges. These should be charged independent from the investment (how it will happen has not yet been decided)
3 - the charges of the investment should not include any commission to the platform/distributor/adviser but by clean of all that.

so, going forward, you would expect the costs of non-commission paying investments to go up and commission paying investments to come down (but the latter probably staying largely neutral or just lower). At the moment, most bundled platforms offer trackers at a loss (or they use the commission paying class)

gadgetmind

dunstonh wrote: »

At the moment, most bundled platforms offer trackers at a loss (or they use the commission paying class)

I'm hoping that the £100+VAT that BestInvest charge for holding non-commission assets will remain roughly the same post-RDR.

Doshwaster

black_taxi wrote: »

when you read financial newspapers---for just £50 a month you can invest in a LOW-COST-TRACKER

not with HL anymore---fook me £2 a month is a 4% cost before its invested

That's the key point. A charge of £2/month may be trivial if you have tens of thousand invested but it's pretty significant if you are drip feeding £50-100 a month into several trackers.

I only moved to HL a few months ago when I finally realised that the 1% fees on my Virgin S&S ISA were too high. My current HL Vanatge account has 4 HSBC trackers - that's almost £100 in fees.

I really like HL as a platform but I won't be running so many HSBC trackers after this change.

dunstonh

gadgetmind wrote: »

I'm hoping that the £100+VAT that BestInvest charge for holding non-commission assets will remain roughly the same post-RDR.

Economies of scale will decide that.

It has been known and well publicised that bundled platforms have been offering lower charges and even running at a loss in an attempt to mop up assets as much as they can (effectively buying business) so when they do have to charge, they can use their "assets on platform" value to try and get reductions from investment houses on the retail AMC or to have enough on platform to allow them to offer a charge relative to their scale or to allow them to increase the charge, expecting a small drop off on unprofitable accounts but the most staying put and paying more.

It is expected that there will be platform consolidation and even a few failures. Some buyouts from insurers who dont already operate a platform are still to occur (if they dont, they will be left behind).

Until we get past RDR and platform review, I dont think we can really say where charges will end up.

The other issue is VAT. Trail with no intermediary services taking place should be subject to VAT. However, most platforms dont currently charge it. They will have to if HMRC do not change their position or the interpretation doesnt get viewed differently.

One positive thing you see on unbundled platforms is that they nearly all use the TER and not the AMC on their documentation and website data.

Botany

dunstonh wrote: »

I

So, effectively you should end up with three sets of charges

1 - adviser or distributor
2 - platform
3 - investment

1 - should be eliminated if you are not using an adviser although the distributor will have an add on charge if they dont run their own platform but use someone elses (although "own" platforms are likely to add on distributor charges as they will become responsible for some things that incur cost)
2 - the platform charges should be the same whether you use shares, funds (commission or non commission) other than specific trading charges. These should be charged independent from the investment (how it will happen has not yet been decided)
3 - the charges of the investment should not include any commission to the platform/distributor/adviser but by clean of all that.

so, going forward, you would expect the costs of non-commission paying investments to go up and commission paying investments to come down (but the latter probably staying largely neutral or just lower). At the moment, most bundled platforms offer trackers at a loss (or they use the commission paying class)

Dunstonh, point 2 above intrigues me. Does it mean to say that eventually it won't make a difference whether one holds trackers, active funds or ITs, or ETFs, as there will be a fixed platform charge which will apply regardless of the 'type' of holdings one have?

gadgetmind

dunstonh wrote: »

It has been known and well publicised that bundled platforms have been offering lower charges and even running at a loss in an attempt to mop up assets as much as they can

Hargreaves Landsdown aren't running at a loss, that's for sure!

One positive thing you see on unbundled platforms is that they nearly all use the TER and not the AMC on their documentation and website data.

I really can't see the point of quoting AMCs at all. It's rather like putting the price before tax on a petrol pump.

Imnoexpert_2

On a slightly different note.

I think Dunstion is right that HL is dipping its toe in the water here. All these platforms are clearly going got have big changes (threats and opportunities). They have a range of untried pricing options they must be thinking about.

One thing we can do is tell them our thoughts (in our thousands) and I suppose ultimately we will vote with our feet. I have just sent a polite email to them expressing my feelings. I think we should all do this!

They are clearly a marketing oriented company and as such should be quite sensitive to its customers feelings.

Imnoexpert

dunstonh

Dunstonh, point 2 above intrigues me. Does it mean to say that eventually it won't make a difference whether one holds trackers, active funds or ITs, or ETFs, as there will be a fixed platform charge which will apply regardless of the 'type' of holdings one have?

Yes. The platforms will not be allowed to use the investment commission on some funds to cross subsidise those that do not pay a commission (or to use some investors to cross subsidise others)

Hargreaves Landsdown aren't running at a loss, that's for sure!

They are not. There is generally a point at which a platform should break even and move to profit and they are well through that. Skandia are bigger than HL but are making a loss but that is due to other issues that HL do not have. Although Skandia have a parent with large pockets (although one that has said its time to end the loss).

However, HL are taking all the platform commission and half the IFA commission on ISAs and all the IFA commission on SIPPs (despite doing none of the work). Their accounts say they get around 0.8% of assets on platform. That is going to stop. So, they need to replace it with something else. How they replace it and how much they are willing to reduce their cut to is unknown. It is certain that £2pm is not going to be enough.