Hargreaves Lansdown "playing hardball"

jimjames

Rollinghome wrote: »

Describing the press speculation as "unfounded" is somewhat disingenuous and makes him look even more slippery. The reports I saw in the financial press were founded on the analysis by Barclays who in turn based their findings on Hargreaves Lansdown's current margins of around 0.7%. Either they intend to cut their margins, in which case their shareholders should be told, or they will maintain them with the Waitrose-style pricing announced by Danny Cox.

Clearly, they don't have good news that they want to convey to their customers as soon as possible.

When they are specifically quoted in this article saying "'Our charging is going to be tiered - percentage based." then it really is misleading to suggest comments are unfounded when they are producing the speculation themselves by their comments and lack of announcing the details of their offering.

http://www.thisismoney.co.uk/money/diyinvesting/article-2516906/Hargreaves-Lansdown-reveals-new-fees-superclean-funds.html

It must make it quite difficult for them as they are now getting into the realms of being up against deadline of April 2014 and not having the choice of when to announce their pricing - any unexpected events in the next couple of months that cause them to delay could impact them significantly and I guess might start to affect their share price. Let's hope there is no other Royal Mail equivalent coming up!

Of course we could be completely wrong and they allow a drop in margin to attract business back and generate increased profits that way instead - in the way they started out originally. Only they can tell where the tipping point would be for increased business vs screwing existing customers for every penny they can but incremental costs for running a web business once you have invested in infrastructure must be quite low.

Rollinghome

jimjames wrote: »

Of course we could be completely wrong and they allow a drop in margin to attract business back and generate increased profits that way instead - in the way they started out originally.

FT Adviser http://www.ftadviser.com/2013/12/04/investments/wraps-and-platforms/hargreaves-delays-rdr-pricing-as-it-refines-wealth-AMUnm7PiRadwoAqYNWnNPM/article.html say they've now decided not to tell clients what they'll be charged until 2014 in order to "refine" their plan. Which presumably means they're either trying find ways to make 0.7% not sound like 0.7%, or it's back to the drawing board completely.

It's perhaps dawning on them that they can either keep their current margin and lose market share or cut their margin and stand a chance of keeping their current market share. I doubt they can do both long term.

A further problem for them is having allowed themselves to get fat with costs that prevent them getting down to the prices now offered by competitors. Somehow I don't see them selling the new glass palace in Bristol to move back into Hargreave's bedroom.

zagfles

westy22 wrote: »

Well, I am waiting no longer to hear bad news so I have today posted my forms to transfer my HL SIPP to Youinvest whilst they have their £500 exit fees refund offer in place.

I don't want to be rushed into a forced, short notice move from HL in 'early 2014' so I've jumped ship early in anticipation that my costs would rise significantly under HL's new pricing.

I doubt that Ian Gorman or Danny Cox will lose any sleep but my SIPP was of a size that put it in the top 5% of accounts held at HL (according to Barclays).

Just got to hope that my in specie transfer goes smoothly and quickly

Am I missing something here? Is there really any likelyhood that those with large SIPP holdings at HL will see their costs going up? The rumours and speculation would appear to imply the charges for large holdings will approximately halve, not increase! Or what have I missed?

dunstonh

Am I missing something here? Is there really any likelyhood that those with large SIPP holdings at HL will see their costs going up? The rumours and speculation would appear to imply the charges for large holdings will approximately halve, not increase! Or what have I missed?

Depends on your holdings. HL are making on average around 0.7% p.a. Those with managed funds on a large holding may well see a reduction in charges. Those with direct holdings or index trackers will almost certainly see their charges go up as a 0.xx% charge is almost certainly going to be higher than what they pay now.

Financial_Saddler

zagfles wrote: »

Am I missing something here? Is there really any likelyhood that those with large SIPP holdings at HL will see their costs going up? The rumours and speculation would appear to imply the charges for large holdings will approximately halve, not increase! Or what have I missed?

I'm part of this "exclusive" HL group.
Currently, my holdings are split 24% Managed Funds, 38% Trackers, 38% Investment Trusts.
Current TER + other known costs = 0.99%
I'm fully aware that this is too high, but have put up with it while waiting for RDR to unwind.
Using the Barclays "guess", I estimate that my charges would increase by 0.2-0.3%.
Since Sippdeal have had the courtesy to reveal their hand, consolidating my holdings with them would reduce my charges by a similar %.
No-brainer really, unless HL do the sensible thing and cap their charges.

zagfles

dunstonh wrote: »

Depends on your holdings. HL are making on average around 0.7% p.a.

Yes, and the new charges are rumoured to be about 0.35% for large holdings. Hence my surprise that those with large holdings will be worse off.

Those with managed funds on a large holding may well see a reduction in charges. Those with direct holdings or index trackers will almost certainly see their charges go up as a 0.xx% charge is almost certainly going to be higher than what they pay now.

So are they currently paying less than 0.35%? Or do you think the new charges will be higher than 0.35%?

zagfles

Financial_Saddler wrote: »

I'm part of this "exclusive" HL group.
Currently, my holdings are split 24% Managed Funds, 38% Trackers, 38% Investment Trusts.
Current TER + other known costs = 0.99%
I'm fully aware that this is too high, but have put up with it while waiting for RDR to unwind.
Using the Barclays "guess", I estimate that my charges would increase by 0.2-0.3%.
Since Sippdeal have had the courtesy to reveal their hand, consolidating my holdings with them would reduce my charges by a similar %.
No-brainer really, unless HL do the sensible thing and cap their charges.

Presumably the costs for the managed funds would go down and the costs for the others would rise. How would your TER change with clean units?

bowlhead99

SnowMan wrote: »

Were you thinking of this post?

Yes Snowman that was the one, I wasn't going to go back through your history to try to find it, especially as I wasn't actually sure it was you

I take the point that there's a difference between being charged to transfer out when you fancy leaving, versus being "forced" to leave by price hikes.

Whether you are truly "forced" to go is another matter of course; as the competitive environment changes from time to time, and people build portfolios and change their weightings and construction from time to time, pretty much 100% of people who ever transfer out in specie must be doing so because they have discovered that another provider can provide a better combination of service level and price for their particular preferences.

If all providers have put in new fee structures over say a year from late 2012 to early 2014, driven by RDR, it will be tough on providers if they have to let everyone walk for free because their service became less competitive relative to the very best rival for that specific sub-class of investor.

What I mean by that is, a provider could create the best and most fair price structure "on average" with aggregate fees being the lowest percent of assets-under-administration in the entire industry. But an investor with large holdings of one asset class could find a better specialist provider for what he wants to hold, and an investor with low assets could also find a better specialist provider catering to his type of holdings. By creating an overall "middle ground" fee structure in the spirit of RDR, at the same time every rival changes its fees to fixed fees or percentage with or without cap or whatever, you could find that every single client claims you are no longer competitive, by reference to specific rivals.

I guess in that situation only the ones whose fees actually went up will be demanding exit fee waivers (as you are doing at sippdeal), but customer retention must be a headache, and you can see why providers are reluctant to release their pricing - knowing a vocal group of disaffected customers will inevitably flood forums with complaints (whether it is a vocal minority or actually a majority, will be lost in the media frenzy).

I don't envy HL trying to maintain existing margins to keep favour with their shareholders while needing to comfort clients that they are not really making much margin. In that respect it would be much easier to not be listed and so not have customers see what you publicly tell your shareholders you really make from them...

jamesd

zagfles wrote: »

Yes, and the new charges are rumoured to be about 0.35% for large holdings. Hence my surprise that those with large holdings will be worse off. So are they currently paying less than 0.35%?

I'm paying about 0.06% to HL for one holding. A tracker that is the single largest holding in my pension there, around 40% of its total value.

A substantial price rise for a big component could easily increase the overall costs significantly unless I transferred out the affected holding(s). That particular product has around 0.3% or so initial charges last time I looked so it'd be an in-specie transfer out as a cheaper option than even just rebuying elsewhere with new money.

You also need to watch what is meant by tiered pricing. Some meanings offer the high tier price to all holdings, others charge the higher lower level pricing for the first chunk of money, next higher to the next chunk and so on until only the topmost part is at the lower rate. The second way produces a blended charge that's significantly above the top tier rate until the total holding is much bigger than that threshold.

Financial_Saddler

zagfles wrote: »

Presumably the costs for the managed funds would go down and the costs for the others would rise. How would your TER change with clean units?

My estimate assumes a clean unit TER of 0.75% before platform charges. My current managed funds TER is 1.4%, so I will expect lower costs for this element of my portfolio - however, it is on the other 76% of the portfolio that I will probably be kicked!