H-L charging structure

bigadaj

dunstonh wrote: »

An IFA can be cheaper than HL now. IFAs dont get paid trail commission and if you dont want servicing then all you pay is the platform charge and fund charge. yes there will be an initial advice charge but on medium to larger amounts, that can be a cheaper option within a year or two. However, the IFA market and DIY market are different. HL keep most of the old adviser trail commission. Yet dont provide advice. So, that needs to be considered a charge. They are also getting a platform commission which is undisclosed (as is normal for bundled platforms). This is one of the reasons why the regulator are banning that model. For too long it has been seen as giving you some of the charges back back but now it is actually taking something off you. HL do a good job and provide a decent platform for the DIY market. However, their charges are not transparent and clear for 2013. The same can be said for all bundled platforms. The sooner they go unbundled the better it will be. Apart from those that use solely index trackers or direct investments on platforms that relied on cross subsidy from managed funds.

Good post, thanks.

There's still the problem that the majority of the financial industry is addicted to opacity and lack of clarity as this translates as extra Money through costs for the investor. The multiple fund classes available from many fund managers are a good example.

To be fair this might be a wider uk business problem as we seem to have equal problems in transparency in many industries, energy, airlines and others.

planteria

Rollinghome wrote: »

Unfortunately while you can be sure of charges you can't guarantee returns. For anyone with sizeable investments then the charges currently made by HL amount to rather more than pennies unfortunately.

By moving elsewhere they could typically reduce what they pay HL in platform fees and commission by around 60%. That could amount to a saving of hundreds of pound each year especially as some platforms additionally offer classes of funds with lower charges than do HL.

So by all means pay more for a slicker service and snazzier website if that's important to you but do be aware of what it's costing you. Ian Gorham has already made clear that HL would not be able to reduce their charges to the levels of the most competitive and still remain profitable.

i agree re. charges and returns. was just making the point that returns can outweigh the charges many times over............the last thing we want is for people to choose not to invest at all.

By moving elsewhere.....such as to??

Rollinghome

planteria wrote: »

the last thing we want is for people to choose not to invest at all.

Is it? Or shouldn't that rather depend on the individual's exact position?

planteria wrote: »

By moving elsewhere.....such as to??

There's a long and very detailed thread on broker charges maintained on this board that should help you and a whole range of helpful articles on Justin Modray's Candid Money website http://candidmoney.com/guides/3/guide-to-isa-discount-brokers

From the Candid Money articles you'll see that the most price-competitive service will depend on the size of your investment and the holdings but HL are almost invariably among the most expensive.

Froggitt

And also among the most expensive to move away from once you find out they are among the most expensive.

jimjames

dunstonh wrote: »

HL keep most of the old adviser trail commission. Yet dont provide advice. So, that needs to be considered a charge. They are also getting a platform commission which is undisclosed (as is normal for bundled platforms).

While all this is true HL were one of the leaders in reducing costs and are still far cheaper than buying many investments direct from the fund manager.

HL generally have no initial charge but fund manager can be up to 5.5% IC to pay for advice that you never receive. In most industries going direct can be cheaper but fund managers seem to be the exception by charging more.

So although HL may not be the cheapest I think the real culprits are the fund houses that charge full IC and keep trail commission but provide no advice or service that HL do.

Rollinghome

jimjames wrote: »

So although HL may not be the cheapest I think the real culprits are the fund houses that charge full IC and keep trail commission but provide no advice or service that HL do.

Presumably because they relied on commission-based financial advisers to sell their products who wouldn't have been too pleased to have been undercut on price.

L&G moved in that direction 21 years ago with their heavily marketed UK Index fund with no initial charge and low AMC. Following RDR and with more people moving towards DIY, will any fund managers be tempted to review their pricing policy for a bigger chunk of direct sales do you suppose, especially if HL try to squeeze their margins to boost their own?

WaltD

This has been a very interesting and informative thread. Many thanks to all for their comments and suggestions.
My conclusion is that it is best to sit tight (with HL) for the moment, but to keep my options open. I'll reserve my decision until HL and other platforms have published their post-RDR charging structure in detail - which will probably not be until some time next year.
As a few contributors have remarked, it is highly unlikely that HL will price themselves out of the market! We must wait and see.

planteria

i agree, i think, Walt
i am still thinking i will invest this tax year's ISA allowance and my 2013 SIPP contribution with HL.....but i do like the idea of a better deal:A

gadgetmind

Based on what I've heard to date, I think we'll mostly be getting worse deals!

dunstonh

gadgetmind wrote: »

Based on what I've heard to date, I think we'll mostly be getting worse deals!

It is inevitable for non-commission paying investments that you will pay more if you use a platform. However, for commission paying investments, the fee could be lower as there would be no trail commission for the platform to keep. Just the platform charge. So, managed funds will become cheaper and index trackers/direct holdings will become more expensive.