Hargreaves Lansdown unveils new Wealth 150+ list

Rollinghome

cepheus wrote: »

So is this a genuine 'lower charge' relative to other providers, or might competitors have also negotiated a reduction?

They say: "No other broker offers the same range of funds with the same low prices". So they aren't claiming that all the funds aren't available at the same price but not exactly the same range.

Have only had the chance to glance at it but there does seem to be a bit of jiggery-pokery going on and some providers seem to have raised prices in order to then "discount" - very much in the Tesco style.

For example they say the version of M&G Optimal Income they offer has a clean AMC of 0.75%, very high for a bond fund, but then offer a 0.05% "loyalty bonus" to give 0.70% net.

But I held the bundled class A version of that fund through Cavendish for a net AMC of 0.50% after rebate of 0.5% trail plus a 0.25% platform fee, so total of 0.75%. Which leaves HL's "special offer" of 0.70% plus 0.45% platform, total 1.15% less than attractive.

Another interesting one is the Troy Trojan class O which has an AMC of 1.00% and HL have negotiated what looks like a very generous 0.25% loyalty bonus. But Troy Trojan class O is available to existing investors at 1.00% by going direct through Capita without any additional platform charges whereas HL will charge a 0.45% platform fee on top. (Edit: As already mentioned by Koru.)

Seem to be quite a few funds that had been previously kicked out of the old Wealth 150.

So interesting but investors will need to be sure any discount is real and they're not falling for the manipulation of prices as for wine etc. we see in dodgier supermarkets.

joerugby

I've just analysed the impact of the new HL charging regime on our portfolio, including the effect of new loyalty bonus levels announced today.

We have £395,000 spread across about 20 funds, 7 of which are in the wealth 150+. About a quarter of our investment is in ISAs and the rest is currently unwrapped. All the funds we hold are now categorised as "inclusive".

Our position for this year now looks like this:

Projected loyalty bonuses: £2,480
HL charges: £988
Net loyalty: £1,493

The net loyalty figure is more than three times what we received last year (admittedly on a slightly smaller pot)

I think I'm going to sit tight

ColdIron

Most people will be better off than before with the new pricing structure, except those who have large holdings in trackers that used to pay the £2 pcm platform fee. That doesn't make HL cheap, they're not compared to the competition but you will benefit from lower charges above £250,000 and the Waitrose service does have a value to some

Your new inclusive funds will give you the loyalty bonus in cash and it would probably be better if you switched to the unbundled classes as it keeps the cash in the funds

PS are you sure about the £988 charge? Looks to me like you've multiplied your £395K by 0.25% and not used the tired charging or did you come to an arrangement with them?

joerugby

ColdIron wrote: »

Most people will be better off than before with the new pricing structure, except those who have large holdings in trackers that used to pay the £2 pcm platform fee. That doesn't make HL cheap, they're not compared to the competition but you will benefit from lower charges above £250,000 and the Waitrose service does have a value to some

Your new inclusive funds will give you the loyalty bonus in cash and it would probably be better if you switched to the unbundled classes as it keeps the cash in the funds

PS are you sure about the £988 charge? Looks to me like you've multiplied your £395K by 0.25% and not used the tired charging or did you come to an arrangement with them?

I'm pleased to say we've been offered 0.25%

I'm happy with the inclusive funds. Having the loyalty bonus in cash helps for us as we are retired and live (partly) on the income

Thanks for the comments

masonic

joerugby wrote: »

Our position for this year now looks like this:

Projected loyalty bonuses: £2,480
HL charges: £988
Net loyalty: £1,493

The 'projected loyalty bonuses' will now be pretty much the same across all platforms, so it would be possible for you to get up to £900 more in net loyalty per year if you were to switch to a platform charging a flat fee. If you believe you are getting sufficient extra value for that £900 by sticking with HL, then that's fine, but just comparing your position to last year won't give you the full picture.

koru

joerugby wrote: »

I've just analysed the impact of the new HL charging regime on our portfolio, including the effect of new loyalty bonus levels announced today.

We have £395,000 spread across about 20 funds, 7 of which are in the wealth 150+. About a quarter of our investment is in ISAs and the rest is currently unwrapped. All the funds we hold are now categorised as "inclusive".

Our position for this year now looks like this:

Projected loyalty bonuses: £2,480
HL charges: £988
Net loyalty: £1,493

The net loyalty figure is more than three times what we received last year (admittedly on a slightly smaller pot)

I think I'm going to sit tight

Your choice, of course, but you could probably save about £500 per year by switching to a platform like Interactive Investor.

They would charge you £80 platform fee, so you save about £900 pa, although if you trade a lot you would incur some dealing costs and you would probably pay slightly higher fund charges - say 0.1% on average, which is £395, so net saving is £500 pa.

You could also save a lot more by switching to clean/unbundled funds (with HL or II). If three quarters of your pot is not in a tax wrapper, you are paying tax on the loyalty bonus. If you are a 40% tax payer, you are probably liable to pay 40%x2480x3/4 = £744 of tax. Most clean funds will have charges similar to the "inclusive" funds, net of loyalty bonus, but that's before the tax on the bonus. So, switching to clean will probably save you about £750 per year.

koru

Rollinghome wrote: »

Seem to be quite a few funds that had been previously kicked out of the old Wealth 150.

There are still 90 funds in the so-called Wealth 150. That's about the same number as before, although I'm not sure if the constituents have changed.

joerugby

koru wrote: »

Your choice, of course, but you could probably save about £500 per year by switching to a platform like Interactive Investor.

They would charge you £80 platform fee, so you save about £900 pa, although if you trade a lot you would incur some dealing costs and you would probably pay slightly higher fund charges - say 0.1% on average, which is £395, so net saving is £500 pa.

You could also save a lot more by switching to clean/unbundled funds (with HL or II). If three quarters of your pot is not in a tax wrapper, you are paying tax on the loyalty bonus. If you are a 40% tax payer, you are probably liable to pay 40%x2480x3/4 = £744 of tax. Most clean funds will have charges similar to the "inclusive" funds, net of loyalty bonus, but that's before the tax on the bonus. So, switching to clean will probably save you about £750 per year.

Thanks

I'm aware of the tax position. The unwrapped funds are in my wife's name and she has a marginal rate of 20% which I've already accounted for in the £2,480

I agree we could probably increase our income by around £500 with III but I'd like to wait and see how they cope with a massive increase in volumes before risking this.

I will look into using clean funds in the coming weeks but that would mean in practice a significant reduction in income for us, albeit offset by a likely increase in capital values. I'm not keen on that as our strategy is to live on the natural yield from our investments and leave the capital untouched.

Does anyone know when the HMRC position on loyalty bonuses is likely to be resolved?

masonic

joerugby wrote: »

I will look into using clean funds in the coming weeks but that would mean in practice a significant reduction in income for us, albeit offset by a likely increase in capital values. I'm not keen on that as our strategy is to live on the natural yield from our investments and leave the capital untouched.

Does anyone know when the HMRC position on loyalty bonuses is likely to be resolved?

Everyone will be forced into clean funds in 2016 so that will resolve HMRC's position on taxing rebates.
It's hard to say what will happen in the interim.

koru

joerugby wrote: »

I will look into using clean funds in the coming weeks but that would mean in practice a significant reduction in income for us, albeit offset by a likely increase in capital values. I'm not keen on that as our strategy is to live on the natural yield from our investments and leave the capital untouched.

Why would income reduce? Clean funds come in income classes, so you could get the same income. In fact, slightly more, because funds usually take the AMC out of income, so the lower AMC on clean funds means more income available to be distributed, so the yield on the clean fund is higher than on the equivalent dirty fund.