Hargreaves Lansdown "playing hardball"

grey_gym_sock

Porcupine wrote: »

The charges like 0.5%, 0.7%, in this thread are on top of the fund house charge, am I right? (Talking 'bog standard' actively managed funds here, not trackers or anything special)

yes.

So we're talking:
Fund house 0.5%
Hypothetical HL fee 0.7%
Total 1.2%

well, for a bog-standard actively managed fund, the fund house would perhaps charge 0.75%.

but HL have (if you believe the leaks) got discounts of c. 0.25% on some funds, so those funds might be only 0.5% for the fund house.

so: standard fund: 0.75% + 0.7% = 1.45% total cost

but "special" fund: 0.5% + 0.7% = 1.2% total cost

Compared with say Cavendish:
Fund house 0.5%
Fidelity platform fee 0.2%
Cavendish fee 0.05%
Total 0.75%

cavendish may not have HL's "special" deals. if they don't, they'll cost 0.75% + 0.2% + 0.05% = 1% total cost

So HL's hypothetical 0.7% fee would be roughly equivalent to what many people pay today:
Wrapped fund AMC: 1.5%
minus 'loyalty bonus' 0.25% (if you're lucky)
Total 1.25%

i'd expect it to be broadly similar. it depends exactly where HL decide to pitch their new charge. and which "tier" you fall into (i.e. how much you have in funds with HL).

the complication is that it also looks better or worse depending on how much you have in "special" funds. and then would you consider switching to "special" funds to keep your costs down? (which, frankly, does sound contrary to the spirit of the platform review.)

of course, if you're using tracker funds, then you can be confident that they're not "special"

gadgetmind

Linton wrote: »

For example with SIPPdeal and a £100K pot in funds the SIPP and fund custody fees would be £300 and then in drawdown you would pay £100/year to get at the cash. That is 0.4% before you get to the fund management charges.

Now try again for a pot 10x as large, which is what I'm working hard to achieve by the time I want to use drawdown.

This is (partly) why I keep fees low and prefer them to have a cap.

pip895

Does anyone know if the hypothetical 0.7% HL gets includes the charges they extract for advise? I don't know what percentage of people on HL go for the "with advise" option but those guys will be paying much more - 1.5% at least I would guess.


I personally am not very interested in HL's special funds. I am more interested in what the likes of Unicorn & Miton do post RDR. Would my funds be automatically converted to "clean" versions as the charges come in. Will the reduction in charges offset the new HL charge? I get no loyalty bonus on many of these funds as it is.


I think this gives the answere - but I'm not sure I understand it
http://www.fca.org.uk/your-fca/documents/guidance-consultations/gc13-07

grey_gym_sock

advice is separate from the 0.7% (or presumably, a bit less than 0.7%, given HL's comments). advice is already charged explicitly - the first phase of RDR already requires that.

what HL have said they'll do initially is apply the new charge to everybody, but at the same time increase rebates to the full amount HL are getting from the fund manager. some funds will presumably have rebates of c. 0.75%, more than offsetting the explicit charge; others will have lower rebates than the charge.

and then customers would have a choice about when to actually convert to clean.

(this is all based on reading a few articles in which HL appeared to have leaked their plans. i know nothing ... EDIT: actually, some of it was in HL's results or results presentations.)

pip895

grey_gym_sock wrote: »

what HL have said they'll do initially is apply the new charge to everybody, but at the same time increase rebates to the full amount HL are getting from the fund manager. some funds will presumably have rebates of c. 0.75%, more than offsetting the explicit charge; others will have lower rebates than the charge.

Thanks for that - it does make sense - I was concerned that there might be a gap between when the charges were applied and when clean versions of funds - particularly at the "boutique" end of the market became available.

jimjames

Lokolo wrote: »

As we see here, it says 20% of HL customers have less than £10k. These numbers are estimates and could be way off. But these are the numbers that were used to calculate the 0.7%.

I'm one of those. I left a small portion of my portfolio with them for the funds that had the highest rebates just to keep an account running.

If they drop their charges to a reasonable level then I would look to move the main portfolio back to them again having moved away to Cavendish in 2011.

I guess a reasonable portion are also new investors starting out - the HL website is particularly suited to new starters so could be more likely to have higher proportion of smaller amounts as people build up their portfolios and get more confidence in investing.

Obviously HL are reading this thread based on the censorship of the inital post but it would be interesting to know if they got cold feet announcing this week as a result of the views they are reading here.

Lokolo

Rollinghome wrote: »

If we don't know where they got the data or made their calculations then I don't quite know how we could assert "this would be completely wrong" . I would assume they started from HL's current margins which they have said they intend to maintain.
I think HL might be coming to the same conclusion. Perhaps Barclays need you to help them out.

Would should be could

My point is there is no way to verify their estimates based on public information. They could be way off, obviously they might not be though.

Not sure I would want to work for Barclays, I have heard stories from colleagues....

jimjames wrote: »

I'm one of those. I left a small portion of my portfolio with them for the funds that had the highest rebates just to keep an account running.

If they drop their charges to a reasonable level then I would look to move the main portfolio back to them again having moved away to Cavendish in 2011.

I guess a reasonable portion are also new investors starting out - the HL website is particularly suited to new starters so could be more likely to have higher proportion of smaller amounts as people build up their portfolios and get more confidence in investing.

Obviously HL are reading this thread based on the censorship of the inital post but it would be interesting to know if they got cold feet announcing this week as a result of the views they are reading here.

Yes and now I have started collating charging structures, a lot of providers are now starting to charge trading fees. This will severely impact new starters and low contributors.

Most have a £1.50 regular investment, or £5-10 general charge to buy funds. A £50 a month per fund investment would mean a 3% initial charge. Buying one of funds as a one off would really need a minimum of £1000 to get the "initial charge" down to 1%.

It's slightly annoying. All the funds I have built up over a number of years I have sold for extra house deposit. This means I effectively have started again this year from £0. I have a low balance and low contribution rate for the next 4 months, so there's going to be a lot of decision making from my side about which provider to go for.

What will be a pain, is that in 3 years or so I will have large amounts in my ISAs, which could mean that the provider I am going to choose will become outdated, and I'd then have to move and all those transfer out fees...

rpc

gadgetmind wrote: »

What HL need to understand is that a key part of the duty of those who've been on a gravy train is to act with grace and dignity when said train pulls into the station.

Yes, but they need to make sure that the sports car is ready and waiting to take them to their private yacht first.

blizeH

Is there any easy way to switch funds out from HL to Cavendish for example? Especially worried about my ISA and the allowance I've built up.

I'm guessing I won't really benefit by moving any of my individual shares though?

Linton

gadgetmind wrote: »

Now try again for a pot 10x as large, which is what I'm working hard to achieve by the time I want to use drawdown.

This is (partly) why I keep fees low and prefer them to have a cap.

Sounds fair enough. I would have thought there is plenty of room for H_L to have a pretty high cap that would not have a significant affect on their income but would meet your requirements.