H-L charging structure

Radiantsoul

gadgetmind wrote: »

Not from me it isn't!

I guess it is a bit hard on active fund holders who have subsidised passive investors though.

westy22

pqrdef wrote: »

All pile back into iii then! What was it, only £20 a quarter?

And that included the cost of 2 trades each quarter - Bargain!

Rollinghome

The most interesting comment in that article is "Gorham said another benefit of unbundled charging would be that Hargreaves Lansdown’s ‘Wealth 150’ list would no longer be criticised for allowing fund managers to buy their way on with bigger kickbacks to the platform."

Which is a tacit admission of the obvious: that their "Wealth 150" list is currently a list that funds pay to be advertised on. As that was one of the scams that RDR was designed to stop it leaves them with a gap in their income and bit of a problem.

Their other problem is that they've grown too fat and got used to that 0.77% average they get from funds. They give an average of 0.17% as a "loyalty bonus" which leaves them with 0.6%. As things stand, it's difficult for them to get below that and more difficult to conceal it from the customer under the new rules.

They'd get away with charging £60 for the small investor starting off with £10,000 but £600 a year could leave a lump in the throat when they get to £100k and £6000 a year on £1,000,000 for a DIY service won't get past the lips - even though it's only what they've been covertly charging for years.

They're then in the position that if they can't keep the bigger investors they'll need to screw the smaller investors even more just to stand still.

In another article Gorham talks about reducing the Wealth 150 list to just 30 funds they can get a favourable price on. So they might end up in practice offering just a limited number funds at a competitive price.

They'll need to manage this less clumsily than they did the introduction of the fee on tracker funds.

Forever

For people who are investing only a small amount in active funds, this looks an OK deal as they won't be any worse off than now.

They are also addressing their fees on trackers so it would be interesting to see what they offer here. Considering the popularity of Vanguard trackers, I can see this having an impact on HL's popularity too.

However, with their proposed tiered percentage fee structure, as soon as you reach a certain threshold, they will be too expensive and people will go to other platforms (such as iii at 20 pounds per quarter). I know HL do have a good website and excellent customer service but they still do need to remain competitive.

The best thing they could offer is the percentage fee up until a certain limit and then have a cap.

Radiantsoul

Rollinghome wrote: »

Which is a tacit admission of the obvious: that their "Wealth 150" list is currently a list that funds pay to be advertised on. As that was one of the scams that RDR was designed to stop it leaves them with a gap in their income and bit of a problem.

I made a comment on here about that being the case a couple of months ago and was PMed. by an employee stating there is no commercial input and the list if based on research. He also stated he would provide more information on how the list is put together.

SnowMan

Radiantsoul wrote: »

I made a comment on here about that being the case a couple of months ago and was PMed. by an employee stating there is no commercial input and the list if based on research. He also stated he would provide more information on how the list is put together.

What Hargreaves Lansdown should do is to disclose the commission (current and historical) they have been paid on funds for the wealth 150 and funds not in the wealth 150.

Without that, then the suspicion (and in many cases belief) of people that the higher commission paying funds are correlated with the funds in the wealth 150 will understandably remain.

By all means HL could then give an explanation of why it just so happens that the higher commission funds are those in the wealth 150.

But the 'more information' will just be HL marketing spin without that disclosure of past commission, and meaningless.

pqrdef

Forever wrote: »

The best thing they could offer is the percentage fee up until a certain limit and then have a cap.

The problem they're going to have with a cap is that then there's only negative benefit in existing capped customers investing more money. The only way to grow would be to pull in more customers, but that's expensive - advertising, switching incentives etc. Smaller customers don't pay the cost of acquiring them, it's the potential return from larger customers that justifies the customer acquisition budget.

Old_Slaphead

pqrdef wrote: »

All pile back into iii then! What was it, only £20 a quarter?

iii charge a buying/selling fee for UTs (ok you effectively get 2 'free' deals per quarter). With HL you can buy and sell in very small tranches and not be charged - very handy if you're looking at more volatile/risky sectors.

For largish portfolios iii is probably more cost effective

pqrdef

Old_Slaphead wrote: »

With HL you can buy and sell in very small tranches and not be charged

For the time being, anyway. But don't let the FCA hear you mention cross-subsidy.

Reaper

Radiantsoul wrote: »

I made a comment on here about that being the case a couple of months ago and was PMed. by an employee stating there is no commercial input and the list if based on research. He also stated he would provide more information on how the list is put together.

I would love to hear their explanation of why non-commission paying Investment Trusts don't make the list.