H & l sipp

itm2

dunstonh wrote: »

Business card can mean anything with titles. What did his guide to services say about his status? Advisers issue those. Non advisers do not.



The basis of the RDR and the forthcoming platform review is that you should know explicitly who is getting paid what. That is the adviser, the provider/platform and the fund house.

If you buy clean funds, you know there are no hidden commissions. Everybody involved in the transaction is explicitly charged and disclosed. If you buy retail funds you know there are commissions but you dont know how the commissions are split. Retail funds included a payment to IFAs/FAs known as trail commission. Some of that is rebated by HL. However, different funds will pay different levels of commission to the platform provider. One fund house could pay more than another and different funds from the same fund house could pay different amounts.

It isn't questioning HL as such. It is questioning all bundled platforms. With the FSA planning to ban them next year and consumer groups against bundling of remuneration and undisclosed commissions, it isnt just IFAs that question it. The original plan was to ban bundled platforms at the same time as the RDR but it was put back to allow for implementation. The introduction of clean share classes sped up the implementation by most platforms to move to unbundled basis. However, some DIY platforms have chosen to remain bundled at this time. Possibly in the hope they can change the mind of the FSA or find a loophole (rumour has it that one platform is trying to get its own share class or use mirror funds as a means to circumvent it)

His FactSheet indicated that he offered Independent Advice.

Currently HL quote (for each fund):
- Fund manager's initial charge
- HL's discount on this initial charge
- HL Dealing charge
- Fund manager's annual charge
- HL Annual saving on annual charge (loyalty bonus)
- Fund manager's other expenses
- HL Platform charge

Are you saying that, for this to be "clean-priced", HL would also need to declare their commissions as a separate item?

dunstonh

itm2 wrote: »

His FactSheet indicated that he offered Independent Advice.

Currently HL quote (for each fund):
- Fund manager's initial charge
- HL's discount on this initial charge
- HL Dealing charge
- Fund manager's annual charge
- HL Annual saving on annual charge (loyalty bonus)
- Fund manager's other expenses
- HL Platform charge

Are you saying that, for this to be "clean-priced", HL would also need to declare their commissions as a separate item?

Ok, on the basis that he is an independent, it should be noted that virtually all platforms have no initial charge. So, that is pretty much the norm.

Fund manager annual charge and "loyalty bonus" is effectively only giving you back a bit of IFA trail commission on highest priced share class. On an advised case, all that trail commission should be returned to you. IFAs are not allowed to retain the trail commission part. It can be charged explicitly as an ongoing service agreement though.

For that list to be fully transparent, they should be quoting the platform commission and for an IFA to recommend their own in house platform which pays them extra undisclosed commission could be viewed as a conflict of interests. On DIY cases, it isnt a conflict as it is currently allowed (but scheduled to be banned).

For it to be clean, HL would need to rebate their platform commission and the trail commission in full (or use clean share classes) and charge explicitly. Clean means no hidden commissions.

Take Schorder Income Maximiser fund. The retail charge share class is 1.67% p.a. On HL, they rebate 0.20% of that 1.67% making the net effective charge 1.47% and it says HL Platform charge is free. The retail charge share class pays a trail commission of 0.50% and a platform commission which is undisclosed. HL are getting paid a platform commission from that fund and only rebating 0.20% of the 0.50% trail commission. So, is the platform charge really free?

The clean share class for that fund is 0.91%. So, you can work out that HL are getting around 0.56%. We can only say around as different platforms negotiated different rebates and as they are all undisclosed, we have no way to know.

So, an IFA recommending an unbundled platform with no intial charge and a 0.32% platform charge and a clean share class of 0.91% is cheaper than HL without the advice cost. So, why is the HL IFA recommending the more expensive in house option that pays them a commission?

It is important to say that this is not anti HL. It is the issue of bundled platforms hiding commissions.

jem16

itm2 wrote: »

His FactSheet indicated that he offered Independent Advice.

I'm a little confused. Are you using HL on a DIY basis or are you looking to use their advised arm?

Currently HL quote (for each fund):
- Fund manager's initial charge
- HL's discount on this initial charge
- HL Dealing charge
- Fund manager's annual charge
- HL Annual saving on annual charge (loyalty bonus)
- Fund manager's other expenses
- HL Platform charge

What you seem to be quoting here is HL's DIY charging. Or are you saying that the "Financial Practioner" ( odd term that - why not use IFA?) is quoting those charges?

Are you saying that, for this to be "clean-priced", HL would also need to declare their commissions as a separate item?

If this is new business and you are using the advice arm as ooposed to DIY arm then yes, each charge needs to be explicit with no mention of commission.

itm2

To clear up the confusion here - I use HL for DIY investing. I had an entirely different reason for meeting the advisor from HL - i.e. retirement planning. It's just that some elements of my conversation with him seemed to be relevant to the discussion here regarding HL charges.

jem16

itm2 wrote: »

To clear up the confusion here - I use HL for DIY investing. I had an entirely different reason for meeting the advisor from HL - i.e. retirement planning. It's just that some elements of my conversation with him seemed to be relevant to the discussion here regarding HL charges.

Thanks for clearing that up.

Basically at the moment, HL's DIY service is mostly still on bundled charging and is not transparent.

itm2

Presumably Cavendish would also fall into the bundled/non-transparent category?
I suppose if I want a convenient, self-service on-line dealing/management platform for my SIPP/ISA/Other investments then I'm going to have to go with HL/Cavendish/Alliance/whoever, and accept that there will be an opaque element to their bundled charges. The alternative would be shopping around for the best dealing/commission rates and losing out on the convenience of these platforms.

jem16

itm2 wrote: »

Presumably Cavendish would also fall into the bundled/non-transparent category?

At the moment, yes they are still bundled.

I suppose if I want a convenient, self-service on-line dealing/management platform for my SIPP/ISA/Other investments then I'm going to have to go with HL/Cavendish/Alliance/whoever, and accept that there will be an opaque element to their bundled charges. The alternative would be shopping around for the best dealing/commission rates and losing out on the convenience of these platforms.

Some DIY platforms have already changed to unbundled charging and are offering the clean class funds. However even this is likely to change over the course of the year.

simreb

http://www.thisismoney.co.uk/money/investing/article-2274059/How-DIY-investor-build-stock-market-fortune.html?ito=newsletter

Have a look at this article
In this example Alliance is shown to be cheapest and Cavendish next.

Some of the platforms refund all the annual renewal fee but HL only refund a small part of it. They say up to 0.5% but I could only find about 3 funds at this rate.The real rate is under about 0.2% I reckon.

The most critical factor is to compare the total annual cost per fund taking into account any trailing fee refunds.

There will be new companies coming on the scene this year as it appears that all these companies will have to stop taking annual fees from the fund companies which are costing customers a lot of money, for which they do virtually nothing.

itm2

simreb wrote: »

http://www.thisismoney.co.uk/money/investing/article-2274059/How-DIY-investor-build-stock-market-fortune.html?ito=newsletter

Have a look at this article
In this example Alliance is shown to be cheapest and Cavendish next.

Some of the platforms refund all the annual renewal fee but HL only refund a small part of it. They say up to 0.5% but I could only find about 3 funds at this rate.The real rate is under about 0.2% I reckon.

The most critical factor is to compare the total annual cost per fund taking into account any trailing fee refunds.

There will be new companies coming on the scene this year as it appears that all these companies will have to stop taking annual fees from the fund companies which are costing customers a lot of money, for which they do virtually nothing.

Thanks - those links were very useful. It looks as if Allliance may not be the best choice for me, as I'll be largely in drawdown mode and frequently selling/rebalancing/withdrawing. Their transaction costs would make this less attractive.
The Cavendish site says "NO Cavendish Online fee" - does this mean that all fund purchases/sales are free, as well as cash withdrawals?

jem16

itm2 wrote: »

The Cavendish site says "NO Cavendish Online fee" - does this mean that all fund purchases/sales are free, as well as cash withdrawals?

It will at the moment. However as Cavendish is a bundled provider, their fees will have to change once the Platform review happens.