Leaving HL without transfer charges

le_loup

Confusion heaps upon confusion.
And all this was to make it transparent! B0llocks!

Chris2000

dave875933 wrote: »

I’ve also seen that cheap HSBC all share tracker at Halifax. Did think it must have been an error but if not would be simultaneously good and annoying as its availability would make a big difference to platform choice.

It appears to be a genuine unit class with zero annual management charge that is normally reserved for internal use by HSBC Group. It crossed my mind that Halifax may have added the freely available Institutional A class units (which I asked them to do) but linked to the wrong document, but the unit price quoted on their trading platform and research centre is not the A class unit price.

HL quote 445.70 for A class and Halifax quote 450.20 for Institutional. Whereas AJ Bell's fund research centre quotes 450.20 for A class and 445.70 for Institutional. I don't have an account with AJ Bell to check what price they trade at, but these prices can't all be right.

I haven't yet found a way of cross-referencing the fund codes that Halifax use on their dealing platform (Mex ID?) with the more common ISIN codes used by HL and others.

masonic

Chris2000 wrote: »

HL quote 445.70 for A class and Halifax quote 450.20 for Institutional. Whereas AJ Bell's fund research centre quotes 450.20 for A class and 445.70 for Institutional. I don't have an account with AJ Bell to check what price they trade at, but these prices can't all be right.

Wow! Morningstar and Trustnet also disagree with each other over which share price is which. What a mess.

Chris2000

masonic wrote: »

Morningstar and Trustnet also disagree with each other

AJ Bell links to Morningstar data. I'm sure that's the one that has the prices the wrong way round.

Stochasticity

naedanger wrote: »

My view is that all customers have a watertight case for asking for their exit charges to be waived since HL have increased the charges for paper statements, increased exit costs that will apply in future and introduced new charges such as the probate valuation charge.

Also OFT guidance makes clear that even if price changes are a result of regulation they are unfair unless customers are given an opportunity to exit free of charges.

For what it's worth, I don't agree with your reading of this (and a lot of the "valid reasons are not a route to fairness" dialogue based on the FCA/OFT's guidance in this thread), and it'd be interesting to see this tested in front of the Ombudsman/a court.

In terms of active funds which pay full fat commissions, the changes that HL are making (alongside the rest of the platform universe) are plainly because they are required to do so for regulatory reasons (and their terms and conditions include provision for making changes for regulatory reasons): that is, they will no longer be able to retain commissions. So HL are now rebating all commissions and replacing a portion of their overall remuneration (but only a portion, as their announcements to shareholders make clear) with new explicit charges.

In my view the typical active investor has three problems arguing that they should have a free exit:

1) The changes are the result of regulatory necessity (a valid reason by almost any definition), and this valid reason is included within HL's terms and conditions.
2) It is disingenuous to argue when there is no overall price increase that the changes (or the term giving rise to the changes) cause a significant imbalance to the consumer's detriment.
3) The exit charges are also clearly stated in the existing terms and conditions and no new exit charges are being imposed within an unreasonable timescale.

The key sections in my view are sections 3.5-3.9 of the FCA guidance and sections 10 and 12 of the OFT guidance which state "terms which allow a firm to unilaterally vary the terms of its contract are less likely to be unfair if: (i) there is a valid reason which is specified in the contract" (FCA 3.5), "we are unlikely to object to a term that states that unilateral variations may be made...to meet regulatory requirements" (FCA 3.7), "a term is more likely to be found fair if (a) it is narrowed in effect, so that it cannot be used to change the balance of advantage under the contract – for example, allowing variations to reflect changes in the law, to meet regulatory requirements or to reflect new industry guidance and codes of practice which are likely to raise standards of consumer protection" (OFT 10.3), and "The OFT does not consider that use of 'valid reasons' normally justifies price increases" (OFT footnote 30, my emphasis).

(Also, technically, HL have only increased charges - they have not reduced any. It is the fund managers who have reduced their charges albeit because they are no longer going to be paying commission to HL.)

But the fund managers are paid by you, and them paying commission to HL is a part of the existing contract, so I don't think the semantics are likely to get you far with this line of argument.

jamesd

HL are not planning to rebate all commission. They estimated in their analysts briefing that if half of customers converted to clean funds over the following twelve months, 25% in the first quarter, they would lose about £5 million in continuing fund commission. The initial value was stated in the audio briefing to be £9 million a year.

Overall with the changes they expected a margin of 0.44% of the funds under management. In their recent interim results presentation to analysts they reported that their cost ratio had fallen to 0.196%.

So far as costs go, their CFO in the interim results Q&A after 48:00 mentioned that electronic reregistration is a big deal for them and for ISAs a lot of the transfers can be done in the same day or within hours instead of weeks and is "really positive" and rolling out now on the pensions side. While their costs are reducing, they are increasing their charges in this area, while all platforms are required to participate in electronic transfers.

naedanger

I drafted the following before reading Stochasticity's earlier posts. It explains why I believe customers who have seen a price increase have a right to a free exit under FCA/OFT guidance. However I now think that Stochsticity's disagreement may just be in respect of customers who have not seen a price increase. The reason I think they too have a right to a charge free exit is given in my next post.

Stochasticity wrote: »

For what it's worth, I don't agree with your reading of this (and a lot of the "valid reasons are not a route to fairness" dialogue based on the FCA/OFT's guidance in this thread), and it'd be interesting to see this tested in front of the Ombudsman/a court.

Well it is hard to see how the OFT could make it clearer. They give a whole section (section 12) on price variation clauses. They explain why it is important each party should be sure of getting what they were promised and the potential for price variation clauses to be unfair. They give only three instances where they consider price variations may be fair.

A degree of flexibility in pricing may be achieved fairly in the following ways.
• Where the level and timing of any price increases are specified (within narrow limits if not precisely) they effectively form part of the agreed price. As such they are acceptable, provided the details are clearly and adequately drawn to the consumer's attention.
• Terms which permit increases linked to a relevant published price index such as the RPI are likely to be acceptable, as paragraph 2 of Schedule 2 to the Regulations indicates, subject to the same proviso.
• Any kind of variation clause may in principle be fair if consumers are free to escape its effects by ending the contract. To be genuinely free to cancel, they must not be left worse off for having entered the contract, whether by experiencing financial loss (for example, forfeiture of a prepayment) or serious inconvenience, or any other adverse consequences

They then even highlight, in footnote 30, the reasons where a price increase is fair do NOT include valid reasons for varying a contract.

"Note the absence of a 'valid reasons' route to fairness. The OFT does not consider that use of'valid reasons' normally justifies price increases, essentially on grounds stated in paragraph 12.3 that is, lack of verifiability."

And the lack of verifiability is particularly relevant to HL's changes. The terms HL are offering me and many others have gone from being very competitive to many times the prices others charge. There is no way we can verify this is justified. Indeed if other providers can introduce the changes at much less cost to their customers why can't HL?

In terms of active funds which pay full fat commissions, the changes that HL are making (alongside the rest of the platform universe) are plainly because they are required to do so for regulatory reasons (and their terms and conditions include provision for making changes for regulatory reasons): that is, they will no longer be able to retain commissions. So HL are now rebating all commissions and replacing a portion of their overall remuneration (but only a portion, as their announcements to shareholders make clear) with new explicit charges.

The changes are in response to regulatory change. They are not required by regulation. For example there is nothing in the regulations saying they must increase their future exit charges, charge for paper statements, charge for probate valuations etc.

In my view the typical active investor has three problems arguing that they should have a free exit:

1) The changes are the result of regulatory necessity (a valid reason by almost any definition), and this valid reason is included within HL's terms and conditions.

The OFT could not be clearer. I repeat the straight quotation:
Note the absence of a 'valid reasons' route to fairness. The OFT does not consider that use of 'valid reasons' normally justifies price increases, essentially on grounds stated in paragraph 12.3 that is, lack of verifiability.

Note that it would be fair if they give customer the option to exit freely. So it is not like they cannot freely respond to regulatory change. They just need to allow their customers to do likewise.

2) It is disingenuous to argue when there is no overall price increase that the changes (or the term giving rise to the changes) cause a significant imbalance to the consumer's detriment.

I am not too sure what you are saying here. However there is clearly an imbalance if the company can change its terms with a great degree of discretion and then expect customer to have to pay if they don't like the changes.

3) The exit charges are also clearly stated in the existing terms and conditions and no new exit charges are being imposed within an unreasonable timescale.

But these are not normal circumstances. It is the supplier who wishes to stop supplying at the originally contracted price.

The key sections in my view are sections 3.5-3.9 of the FCA guidance and sections 10 and 12 of the OFT guidance which state "terms which allow a firm to unilaterally vary the terms of its contract are less likely to be unfair if: (i) there is a valid reason which is specified in the contract" (FCA 3.5), "we are unlikely to object to a term that states that unilateral variations may be made...to meet regulatory requirements" (FCA 3.7), "a term is more likely to be found fair if (a) it is narrowed in effect, so that it cannot be used to change the balance of advantage under the contract – for example, allowing variations to reflect changes in the law, to meet regulatory requirements or to reflect new industry guidance and codes of practice which are likely to raise standards of consumer protection" (OFT 10.3),

The change that is being introduced is not at all narrowed in effect. If they were passing on a fixed levy directly they may just have an argument. However they are not. They are introducing a whole new set of changes to replace a revenue stream.

I don't object to them trying to replace the commission they are losing. But I do object to them doing so without giving customers the option of exiting freely.

A key element of the FCA guidance is that terms are more likely to be fair if they give customers the option of exiting freely. This is repeated often. Why on earth anyone thinks it is fair for one party to radically change a contract (for whatever reason) and force the other party to continue as normal I cannot understand. All they need to do is give customers an option to exit freely. If they implement the changes in a competitive way then what have they to fear? Why the need for barriers (and why are the barriers being increased)?

and "The OFT does not consider that use of 'valid reasons' normally justifies price increases" (OFT footnote 30, my emphasis).

Their charges are being increased. (If they were not then I would not be complaining.) You have seen the word "not" in the above quote. The OFT are saying it is NOT fair to rely on a valid reason to increase the price. (However they say it would be fair if customers are given an opportunity to exit freely, which is all I want.)

But the fund managers are paid by you, and them paying commission to HL is a part of the existing contract, so I don't think the semantics are likely to get you far with this line of argument.

None of the funds I invest in pay commission. They are passive funds, so for the contract between me and HL this is irrelevant.

I would like to see this argued out at FOS. But HL don't seem so keen. I am not surprised they are waiving exit fees before cases get to FOS and I don't think it is to do with "goodwill".

naedanger

Stochasticity wrote: »

For what it's worth, I don't agree with your reading of this (and a lot of the "valid reasons are not a route to fairness" dialogue based on the FCA/OFT's guidance in this thread), and it'd be interesting to see this tested in front of the Ombudsman/a court.

For customers who have not seen a price increase in aggregate (including fund managers' charges) I have the following comments.

1) There are likely to be much fewer complainants in this category since if the charges have gone down why the desire to leave?

2) Such customers need to be clear why they are unhappy. There are a number of possible reasons including a) they expect to be worse in future on the new charging structure or b) they genuinely dislike some of the new charges - the probate charge springs to mind as being objectionable to some people.

3) HL have had a great deal of discretion in how they introduced their new charges. The customer is now unhappy through no fault of their own but through HL's exercise of discretion. The variation is unbalanced in allowing the supplier freedom and discretion in how it has been varied but not allowing the customer the option to reject it freely (by exiting without charge).

4) I agree the argument is not as straightforward if the customer is better off in aggregate on the new charges. But if they have a genuine complaint about it then why should they be forced to continue as normal?

5) HL's charges have increased. The fund managers charges are not HL's charges. I believe it is difficult for them now to say that part of the annual management charge was their charge when they have made a big point of not having annual charges in the past.

dave875933

Organic wannabee. No matter how confused you are I think you need to consider other options in your situation.

Although their overall commitment to no admin fees and exit fees is both unique and commendable, Fidelity look a nightmare for ISAs. I may have misread it but seems you need separate ISAs with them for Funds or Shares or investment trusts, and the "Cash Park" is ridiculous. I think you still have to pay 0.2% to move out of it, which means you pay this every time you buy back into the market after temporarily getting out. (Maybe this could be considered an "admin fee" so maybe conflicts with their overall charges literature anyway.)

As for what they are like to use as you mentioned you didn't see much of them on this forum, they did have a good score at reviewcentre whereas all the other platforms had a bad score, but then they also had a "social media" rep on there (who commented on all the bad reviews and I'm suspicious that the good reviews seem to follow the party line). Alot of the other platforms by the way are on feefo which seems to be from verified accounts only and do seem mostly genuine and useful reviews from what I've read.

II might be OK but at least Halifax and iweb should be considered as well?

dave875933

And don't worry everyone, I'm sure when Trustnet finally get their act together and launch, everything will become crystal clear.:rotfl: