Hargreaves Lansdown "playing hardball"

dunstonh

i can see why a platform should charge the same way for all funds (whether active or passive). but do you see a problem with a platform charging differently for funds and shares?

Yes. There should be no bias between investments held other than charges that are specific to that type of investment (e.g. dealing costs). One of the aims of the platform review was to ensure that people were aware that they were buying platform services when using a platform. Charging different rates for different types of investments goes against that.

However, nothing stops them having different propositions on offer. e.g. full platform and say platform lite. The latter could just offer basic brokerage services and nothing else.

e.g. youinvest's new charges include 0.2% p.a. (capped at £200) on funds, but not on shares. also, cheaper dealing on funds than on shares (£4.95 vs £9.95). is that allowed?

Looking at the charges on their website, their charges dont appear to be platform review compliant. Their research centre on funds shows the retail (bundled) share classes. That is not an issue (although most are moving to clean only going forward). However, they say they refund upto 0.5% of the commission as a rebate. That is an indication of an issue as that would suggest they are only rebating fund based trail on retail share classes. Not the platform commission as well. If you put platform commission and fund commission together than that would exceed 0.50% on a retail share class managed fund. Platform review requires ALL commission to be rebated.

If you go into the fund research, the fund at the top of their list is BlackRock Overseas Corporate Bond Tracker A Acc. Class A was the commission paying fund. Unbundled platforms tend to offer class D or class L (class L is effectively superclean).

Looking at a managed fund further down the list you have Fidelity UK Smaller Companies A-Acc. Class a with Fidelity is commission paying. The OCF (TER) is 1.72%. Class W is the clean share class and that fund has a charge of 1.00%. So, effectively the difference is the commission. A 0.72% difference.

dunstonh

If you look at the Barclays figures, it is surprising that they have 75% with less than £100k. They have been very successful at getting small investors but don't appear to have had as much success with larger investors. The larger investors are more profitable.

Most platforms tend to offer pricing that is cost neutral to bundled pricing or cheaper on £100k or more (some need a bit more). Under that level, virtually all platforms, if not all, charge more than the bundled pricing on a like for like basis. So, if you go by trends and those Barclays figures are right, HL are in trouble when it comes to setting their price and maintaining both profitability and cost effectiveness.

jamesd

blizeH wrote: »

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?

Very easy, in general. Just an ISA transfer.

What you need to do is for each investment, check the cost of selling and buying, including things like stamp duty and initial charges/spreads. Use an in-specie transfer if that cost is cheaper than the sell/buy. Also note that at least some FOS decisions have ruled that there has to be a free transfer out option, based on FCA guidance. Which means there may be no in-specie transfer charge at all, though it may take taking HL to the FOS to get the charges refunded, based on reported past experience. It's probably safe to assume that there will be a collaborative effort here to handle how to make such claims, if HL makes them necessary.

grey_gym_sock wrote: »

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.

A customer could presumably just buy the discounted funds and do an in-specie transfer to keep the lower fund manager charge and get a reduced platform charge. If I look to transfer from HL, which seems more likely than not, unfortunately, that's what I'd look to do.

On the other hand, if they get to really competitive overall cost, there's another £50,000-60,000 that could head their way, increasing by perhaps £25,000 a year.

It's going to come down to a straight enough choice between whether they think they are worth more than about an extra 0.1% (around £200-250 a year) for what they think is special about them. If they try for a premium above that it's unlikely I'll end up with them because I don't value any putative value add at more than that.

jimjames wrote: »

it would be interesting to know if they got cold feet announcing this week as a result of the views they are reading here.

Maybe, if they didn't realise how many were just giving them time before acting on a decision to move that's already been made if their pricing doesn't improve. That's my situation and it has been for quite a while now. Pricing - and lack of transparency about it in their otherwise excellent customer service - is the sole reason for that. Otherwise I'm entirely happy with them and wouldn't be interested in moving. Which is why I'll give them a chance to do what it takes to keep my business if their general pricing isn't good enough to do it.

jamesd

dunstonh wrote: »

If you look at the Barclays figures, it is surprising that they have 75% with less than £100k. They have been very successful at getting small investors but don't appear to have had as much success with larger investors. The larger investors are more profitable.

Their current pricing gives larger investors the strongest incentives to leave them because it's percentage-based, in effect, except for trackers or capped charges for ETFs/ITs/shares. So no surprise that it's an issue for them, they have been systematically pricing themselves out of that bit of business.

jimjames

blizeH wrote: »

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?

Yes it is easy and that's what I did. HL charge a fee per fund to move as is so I just moved in cash which didn't cost anything. The net result to me was rebates of £250 pa compared to around £50pa on HL.

I would consider moving back to HL for a premium over Cavendish as I do value the HL web functionality and service but that premium would need to be small to be make that.

Cavendish charge 0.25%pa for the Fundsnetwork platform and 0.26-0.29% for the Cofunds. I'm currently sticking with Cofunds as there is some functionality that suits my current situation despite the higher cost. That kind of premium over Fundsnetwork is the kind of amount I'd consider moving back to HL for. If the cost is over 0.35% then I'd be moving remaing money away from HL rather than adding funds back to them.

Porcupine

jamesd wrote: »

Maybe, if they didn't realise how many were just giving them time before acting on a decision to move that's already been made if their pricing doesn't improve. That's my situation and it has been for quite a while now. Pricing - and lack of transparency about it in their otherwise excellent customer service - is the sole reason for that. Otherwise I'm entirely happy with them and wouldn't be interested in moving. Which is why I'll give them a chance to do what it takes to keep my business if their general pricing isn't good enough to do it.

I'm in a similar position, but I've already given them that chance. They've been procrastinating for so long that I think it's fair to assume that whatever announcement they're going to make, it's not going to be good news. Meanwhile the rest of the RDR landscape has mostly settled out. I'm moving, but slowly via natural turnover rather than a mega transfer that will leave everything in limbo for months. It will probably be to a basket of providers based on the cheapest for each investment type, rather than keeping all in one pot.

Lokolo

jimjames wrote: »

Yes it is easy and that's what I did. HL charge a fee per fund to move as is so I just moved in cash which didn't cost anything. The net result to me was rebates of £250 pa compared to around £50pa on HL.

I would consider moving back to HL for a premium over Cavendish as I do value the HL web functionality and service but that premium would need to be small to be make that.

Cavendish charge 0.25%pa for the Fundsnetwork platform and 0.26-0.29% for the Cofunds. I'm currently sticking with Cofunds as there is some functionality that suits my current situation despite the higher cost. That kind of premium over Fundsnetwork is the kind of amount I'd consider moving back to HL for. If the cost is over 0.35% then I'd be moving remaing money away from HL rather than adding funds back to them.

Do Cavendish currently apply the post RDR charging to clean funds? Their site says about what they will charge (which seems to be a decent blank of 0.25% across everything), but not when the charges will come into effect.

Porcupine

Lokolo wrote: »

Do Cavendish currently apply the post RDR charging to clean funds? Their site says about what they will charge (which seems to be a decent blank of 0.25% across everything), but not when the charges will come into effect.

AFAIK they already do - when you buy you get a choice of retail funds (no extra fee) or clean funds (0.25% extra). That also includes a small number of ETFs.

grey_gym_sock

dunstonh wrote: »

Yes. There should be no bias between investments held other than charges that are specific to that type of investment (e.g. dealing costs).

different dealing charges for funds and shares are OK? but different custody charges aren't?

Looking at the charges on their website, their charges dont appear to be platform review compliant.

is this all from looking at the funds list? AIUI, that is is still to be updated, and as of 1 january 2014, it will only list clean fund classes. i.e. it will only be possible to buy clean classes (though you will be able to keep holding dirty classes, and they'll still be subject to the old charging model).

dunstonh

different dealing charges for funds and shares are OK? but different custody charges aren't?

Funds dont have dealing charges. Direct investments do.

is this all from looking at the funds list? AIUI, that is is still to be updated, and as of 1 january 2014, it will only list clean fund classes. i.e. it will only be possible to buy clean classes (though you will be able to keep holding dirty classes, and they'll still be subject to the old charging model).

I only went by what is currently on their website.