Leaving HL without transfer charges

naedanger

Stochasticity wrote: »

HL's overall charges on full fat commission-paying funds were north of 75bps. So if they'd replaced them with a 75bps platform charge, that'd be fair, and then you wouldn't be arguing that they need to provide investors in such funds a free exit?

If, for each fund, they had exactly replaced the monetary amount of the commission they would previously have received (and provided the fund's annual management charge reduced by at least this amount) with an exactly matching charge then I believe that there is not the same necessity for an opportunity to exit freely. (Though if there were instances of HL previously receiving increases in the rates of commission from fund managers and not passing those increases on to customers then this scenario might also have unfairness to customers.)

But because they've used their discretion (in making a commercial decision that a platform charge at 75bps isn't viable), and have instead implemented an overall platform charge (partially percentage-based and partially time/cost-based) which is cheaper for an investor into commission-paying funds, you believe they do, just because the structure of the lower overall charges is different?

Yes, because there will be some customers who don't like the new charges for valid reasons. Why do you not recognise that some customers invested in active funds may genuinely dislike the new charges, for example the higher future exit charges or the new probate valuation charge or perhaps have small funds but want paper statements etc? Those customers who prefer the new structure are unlikely to want to exit.

And in the real world example HL are charging fund based charges on passive funds. So another reason those in active funds may dislike the new structure is they will lose the opportunity to move to those funds in future without incurring higher charges.

jamesd

Stochasticity wrote: »

So if they'd replaced them with a 75bps platform charge, that'd be fair, and then you wouldn't be arguing that they need to provide investors in such funds a free exit? ... But because they've ... implemented an overall platform charge (partially percentage-based and partially time/cost-based) which is cheaper for an investor into commission-paying funds, you believe they do, just because the structure of the lower overall charges is different?

Some things there:

1. It is not cheaper for all commission-paying funds. A hair over half of all of the tracker funds subject to the £24 a year platform fee are commission paying. I checked all of them and posted the list here. I didn't look at those with a £1 charge but it's clear that they must mostly be paying commission or they would have the higher charge.

2. Even for non-trackers, HL is not planning to rebate all commission but instead expects to retain around £9 million worth a year unless investors convert or switch out of those fund versions. I assume, we don't know, that many will end up with full commission rebated, but not all.

3. Higher exit fees can't really be justified because HL have said in public - both their CFO and CEO in an analysts Q&A - that their in specie transfer costs are being reduced due to the increasing use of electronic switching, which is mandatory for all platforms. This one is a fine example of a provider exploiting a lack of transparency to increase prices while costs of providing the relevant service are dropping. That's just business but it does mean that an increase in cost of providing the service clause can't apply.

4. It's not the ongoing charges now or after 1 March that matter, it's also the increased exit costs that may serve to lock people in after future changes. Someone may reasonably decide to exit now rather than waiting until a later time when they may be more disadvantaged, just because of the higher exit fees.

5. It's not the overall effect on all customers that matters, it's the effect on each individual subject to the contract. A change of pricing basis means some are likely to be disadvantaged compared to the previous basis and would have a cause to act even if on average there isn't a cause.

masonic

Stochasticity wrote: »

Agreed, although having announced all the changes together, I suspect the significant imbalance to a consumer's detriment would be assessed on the basis of a comparison between charging model A (the charges pre-1 March 2014) and charging model B (the proposed charges post-1 June 2014), and whether the overall cost is higher or lower (i.e. without allowance for a complaint on the basis of a comparison between the charges 1 March 2014-1 June 2014 and post-1 June 2014). So if you're aggrieved, complain and move now rather than later.

I guess you may have a point. Customers have until June to exit before the new exit fees come into effect.

Say they have an ISA and Fund & Share account, they have a small amount of uninvested cash in each account (monthly loyalty bonus gets paid there, so it is not practical to completely empty). The increase in exit fees for them would be 2 x £30 account closure fee plus 2 x £25 cash transfer fee. The other exit fees are pre-existing. Let's say they are invested in Wealth 150 funds and will be better off by 0.2% (0.05% in the 3 months between March-June) because of the charging structure introduced in March. They have a portfolio of £200,000.

The increase in their exit costs is £110
The saving they will make if their transfer / closure is completed at the end of May is £200,000 x 0.05% = £100.

That could potentially make it difficult for them to argue a significant imbalance to their detriment, since if they wait until after June to leave, they'd actually have saved enough to more than cover the increase in exit costs.

Edit: On second thought, the above calculation is academic, since nobody will know exactly what the difference in their ongoing fees will be until HL announce the unbundled charges, by which time it would be too late to reject the new terms. People have to complain now on the basis of the charges they do know.

armageden

This thread is moving so quickly that some of you who are still debating a complaint to the FOS may have missed my post last night.The FOS do seem to be taking notice so if you can justify a complaint it would it would be taken seriously

masonic

armageden wrote: »

This thread is moving so quickly that some of you who are still debating a complaint to the FOS may have missed my post last night.The FOS do seem to be taking notice so if you can justify a complaint it would it would be taken seriously

Then maybe the FOS will give the FCA a kick up the a***.

petepool

Like others on here. I've also receieved a response to my letter of complaint waiving the exit fees as a gesture of goodwill and trying to tempt me to stay with lower fees. I don't know if the later offer was influenced by the fact that I had already started the transfer process.

I'll need to have a look at the comparison in costs again (using Snowman's excellent spreadsheet) but I'm leaning towards leaving given the way this change has been handled. A bit of a shame as I have been very happy with HLs customer servive and website to date.

blizeH

I'm starting to really regret my decision to transfer out my ISA as cash to Charles Stanley to avoid the £25 fee... it's taken a few days for my VLS fund to sell, and now apparently it will take a few days for it to 'settle' and then an even longer time to then transfer to Charles Sanley.

Grr. I know it's plain luck, but I've missed out on a fairly big rally on the stock markets too by the looks, meaning I've lost considerably more than £25 if things stay as they are now (and could get considerably worse)

le_loup

The market could well drop towards the end of February as the Yanks go through their quarterly budget nonsense. So why worry, investment is for the long term.

blizeH

You're right, thank you, it's just frustrating that in order to avoid a £25 charge, I've potentially lost a hell of a lot more money than that. On hindsight it wasn't a very good move.

naedanger

blizeH wrote: »

I'm starting to really regret my decision to transfer out my ISA as cash to Charles Stanley to avoid the £25 fee... it's taken a few days for my VLS fund to sell, and now apparently it will take a few days for it to 'settle' and then an even longer time to then transfer to Charles Sanley.

Grr. I know it's plain luck, but I've missed out on a fairly big rally on the stock markets too by the looks, meaning I've lost considerably more than £25 if things stay as they are now (and could get considerably worse)

This may be a long shot, but you could you try complaining to HL for your loss to be made good. Your argument could go along the following lines:
1) You transferred to cash solely to avoid their in specie exit charges.
2) Had you known that they needed to waive their exit charges, according to OFT/FSA guidance, you would not have moved to cash but instead transferred in specie.
3) You now believe their exit charges are not permitted under FSA/OFT guidance and that they are waiving them for all customers who would otherwise take their complaints to FOS.
4) Had you known 3) you would not have moved to cash and not incurred the losses you have seen.

In other words you are asking them to waive the transfer costs you have incurred. They are higher than the in specie transfer amounts because they misled you.

That said, if I were HL I might offer to pay your in specie transfer cost of £25 (with interest) plus any modest claim for your inconvenience and no more. (And FOS may agree that is a fair offer.) On the other hand I do have sympathy that you are suffering a loss that you would not have done had HL treated you fairly, and offered to waive you transfer costs at the outset. (So I think there would be a form of justice if they now had to pay for your loss.)

In your position I probably would complain (once the transfer was completed and I knew the amount of loss) but I would not spend long on it, and if my complaint was not upheld I would not be upset about it.