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A standard 'fob off' response from HL? Please advise

bobsy31
bobsy31 Posts: 73 Forumite
Ninth Anniversary 10 Posts Name Dropper Combo Breaker
edited 16 April 2014 at 12:52PM in Savings & investments
Hi

In recent times I have been a little slow in reacting to the RDR changes and the new charges by HL. While having not written a full blown 'official complaint' letter to HL I did send them a letter to explain themselves and to explain to me how I might be better off. Below is the response I got, I was hoping users on this forum could offer their input on whether this is a standard fob off response and what I should do.
A bit of background:

- Only 4 years into my Investment life
- Have c35k in a S&S Isa
- Pay in a set amount every month across a number (15 or so) funds, VLS80% is about 1/5th of them, the rest is shared across the other funds (differetn geographies/sectors etc)
- Plan was (is still I suppose) to carry on doing this for another 20-25 years
- Don;t have a SIPP or any other pension elsewhere, my s&S isa wil be my pension pot

The questions is while I am not a 'big value' HL customer now, I wrote in my letter that I will be in the future and wanted to see if they would value my 'future value' as a customer. From the response below (minus any offer!) they might not do, or was a not firm enough on reflection?

What would people do if they were in my position?
Any advice/input would be much appreciated. Many thanks in advance for your comments.

Below is the HL response:

Thank you for your email.

The recent sale on your account was placed to cover fees which were due for which you did not have sufficient cash available to settle. This sale was made in keeping with our terms and conditions.

The ability for Hargreaves Lansdown to cover outstanding fees by selling investments is not new. However, the way in which look to cover fees has recently changed. This is one aspect of our wider changes which were made in response to the Retail Distribution Review – a set of rules applied by our regulator, the Financial Conduct Authority, which govern how platforms such as Vantage should charge for their services.

We wrote to all clients informing them of these changes on 15 January - well ahead of their introduction - to allow clients to digest the changes and ask any questions they may have had. Our intention to sell investments where there is insufficient cash available to meet fees was detailed clearly in this information. Additionally we created a dedicated area of our website www.hl.co.uk/lowcharges which explains the changes in detail. There was a prominent banner advertising this information on our homepage for 4 weeks.

In the past most investors who held funds, such as unit trusts and OEICs, paid a single annual management charge to the manager of their chosen funds. This charge often included an element of commission which the fund manager shared with brokers, such as Hargreaves Lansdown, to help pay for their service. We call these funds ‘inclusive’ funds.

New rules, which come into effect on 6th April 2014, mean annual management charges of funds purchased in the future will not include commission to help pay for services such as Vantage.

As funds purchased from now on do not include payment for Vantage, we need to introduce a separate charge for holding funds in the Vantage service. For the first £250,000 of funds within each Vantage account, the charge will be 0.45% per annum. On the value of funds between £250,000 and £1m this will be 0.25% p.a. Between £1m and £2m this will be 0.1% and there will be no charge on the value of funds above £2m.

To help you manage cash balances to meet the fees due we have introduced a suggested Minimum Cash Balance (MCB). The suggested MCB is designed to give you an idea of the cash you should hold on account to meet future fees. This would also avoid the necessity to sell any of your current holdings to meet fees in the future should there be insufficient cash on your account.

As a result of the FCA’s new rules, fund management groups are launching new versions of their funds with lower annual management charges. We call these funds ‘unbundled’ funds. Older fund holdings which tend to have a higher annual management charge we are calling 'inclusive' funds. These will have a higher Loyalty Bonus which represents the commission we used to receive.

As you hold the inclusive funds they would still also be subject to our charges, however, it is important to consider the increased loyalty bonus payments you will receive. For example, the inclusive funds have an annual management charge of 1.5% (on average), however part of this is returned to you in the form of an increased loyalty bonus. Previously loyalty bonuses were on average 0.17%, but now on average they will be 0.75%. To view the pending amount please navigate to the 'Loyalty bonus' tab after selecting 'My accounts' in the top right of the screen. Loyalty bonus is paid to you for holding certain funds in the Vantage Service and in many cases will more than offset the monthly Vantage Fund charge.

As you can see this will leave you with a 'net' charge of 0.75%, which in most cases is the same as the annual management charge on the unbundled fund class, as such, both classes of units would be subject to the 0.45% platform charge levied by ourselves. Whether you hold the inclusive or unbundled funds this would bring your total charge to 1.2%.

Previously you simply paid a 1.5% annual management charge and received a loyalty bonus payment of 0.17%, which means you were paying 1.33% in total charges.

Although our clients are not used to seeing us levy a charge for holding funds on our platform, the savings of holding either inclusive or unbundled is something that all our clients will benefit from.

In some instances you are able to make further savings by converting your inclusive funds to the unbundled versions. You can establish whether you will be better off if you were to convert from the 'inclusive' units to the 'unbundled' units by clicking on 'Give conversion instruction' once you have logged in online.

This will display all of the funds held in your Vantage Portfolio and will clearly show the current annual management charge and loyalty bonus of the 'inclusive' units plus the new annual management charge for the 'unbundled' units. From this information you will be able to determine which unit is preferential for you.

For more information on the conversion process please visit the How to convert to 'unbundled' units section of our website. Please also download our Fund Conversion Policy from this section of the website. However, conversions take place on a quarterly basis and there will be a short period where you are unable to trade your funds while the conversion is completed.

I hope this has been of assistance, if you have any further queries please do not hesitate to contact us on 0117 900 9000.

Kind regards

Comments

  • naedanger
    naedanger Posts: 3,103 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper Combo Breaker
    bobsy31 wrote: »
    Hi

    In recent times I have been a little slow in reacting to the RDR changes and the new charges by HL. While having not written a full blown 'official complaint' letter to HL I did send them a letter to explain themselves and to explain to me how I might be better off. Below is the response I got, I was hoping users on this forum could offer their input on whether this is a standard fob off response and what I should do.

    In my view if you do not like their new charges then your options are
    (1) leave them (in which case they will almost certainly waive their normal exit charges if you formally complain, wording is available here if required),
    (2) get used to their new charges,
    (3) submit a transfer request in the hope they offer you a deal, but with your size of fund I think this is very unlikely. (HL seem to be only giving special deals to those currently with large funds of around £100k or more). Even if they don't offer you a deal they will ask you to reconsider at which point you can change your mind if you really don't want to go elsewhere.

    Personally I would invest in far fewer funds (probably around 5) and move to a cheaper provider and demand that HL refund my exit charges.
  • bobsy31
    bobsy31 Posts: 73 Forumite
    Ninth Anniversary 10 Posts Name Dropper Combo Breaker
    Thanks for the reply naedanger

    Has anyone had any success in getting a deal based on the levels I have now?

    Also has anyone decided to stay despite the higher charges? Perhaps because the others may change their prices in the future?

    Thanks
  • bobsy - I think that's a shocking response from HL if you took time to write them a letter and they've just posted out a standard template.

    I loved the doublespeak George orwell 1984 part from HL
    "website www.hl.co.uk/lowcharges"

    Trouble is that I think for a lot of passive investors the new charges will go over their heads and they'll simply top up their accounts with cash (like HL tell them to) to pay the overpriced 0.45%pa.

    I'm actually very similar to yourself. have S&S worth 23k and just started a SIPP worth 27k. also helping my sister who has funds of about 20k. i'm at the stage where I'm looking to add about 15-20k per year. so 5-10 years down the line I might be a more significant customer for them. At the moment though I don't like the idea of a % skim and as my fund grows I will probably be looking to somewhere like II which has a fixed year charge (although there will be extra dealing charges).

    I reckon if you've going to contribute over 20-25 years it would probably make more sense to move to another platform. Theres plenty of advice in these forum and a great spreadhseet which lets you compare fees.

    One other point would be to suggest splitting some of your intended saving between ISA and SIPP. Obviously less flexibility with a SIPP in terms of when you can take it but the tax relief that you receive (20% or 40% for higher rate) would make a very significant difference to your holdings. The new rules allowing much more flexibility in taking your SIPP at 55 are also a bonus.
  • bobsy31 wrote: »
    Thanks for the reply naedanger

    Also has anyone decided to stay despite the higher charges? Perhaps because the others may change their prices in the future?

    Thanks

    I have! Mainly because I'm very happy with the way they operate, and the way they've handled (and substantially grown) my portfolio. Have used Selftrade, Co-Funds and flirted with SJP, but H-L beats them all hands down (IMO).

    Waits for posts telling me I'm mad...
  • Ainsley1
    Ainsley1 Posts: 404 Forumite
    posted by Naedanger
    "....leave them (in which case they will almost certainly waive their normal exit charges if you formally complain, wording is available here if required)
    I am also late to this subject and discussion. Would you be kind enough to point me to the appropriate words and any relevant points, please, Naedanger?
    Is there a best approach gleaned from all the postings on the subject ( there's a huge number) prior to any formal complaint? Is it best just to request transfers etc. and see what is offered or request a low cost exit up front?
  • naedanger
    naedanger Posts: 3,103 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper Combo Breaker
    edited 17 April 2014 at 12:48AM
    Ainsley1 wrote: »
    I am also late to this subject and discussion. Would you be kind enough to point me to the appropriate words and any relevant points, please, Naedanger?
    Is there a best approach gleaned from all the postings on the subject ( there's a huge number) prior to any formal complaint? Is it best just to request transfers etc. and see what is offered or request a low cost exit up front?

    If you ask if they will waive their exit charges or request that they do so then they will refuse. Instead you must send them a formal complaint.

    As far as I am aware, everyone who has formally complained has had their charges waived and everyone who has simply asked has been refused.

    The following is suggested wording for a formal complaint.

    Subject: Formal Complaint: FAO Senior Client Services Manager

    I wish to complain that it is unfair introducing new/increased charges (e.g. the new probate charge and new exit charges) without giving customers an opportunity to exit without charge. I now understand that this is also against regulatory guidance e.g. from the OFT and that you have been waiving exit charges for customers who formally complained.

    As a result of the increased charges I no longer want to remain with HL and I expect you to waive my exit and transfer fees just as you have done for others.

    If you refuse, and charge any fees on exit or transfer, then I intend to pursue this complaint via the Financial Ombudsman Service.

    [End of suggested text]

    Send that as a secure message (or modified appropriately if you have already transferred and are now seeking a refund). Everyone who has complained, as far as I am aware, has then been sent a written letter (within about 7 days, sometimes much quicker) from HL agreeing as a "gesture of goodwill" to waive the exit fees.

    Not giving customers an opportunity to exit without charge following a price increase (even if the increase is for regulatory reasons) is against regulatory guidance. For this reason Hargreaves Lansdown will probably not want complaints going to the Financial Ombudsman Service.

    Remember it is HL that are not willing to continue the contract on the originally agreed terms. So in those circumstances why should customers have to pay to go elsewhere?

    Finally chapter 12 (page 57) of the attached is worth a read:

    http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft311.pdf

    Finally if you do not get a positive outcome within 7 days then post back here.
  • ozzage
    ozzage Posts: 518 Forumite
    Part of the Furniture Combo Breaker
    edited 17 April 2014 at 8:04AM
    To the OP, That's certainly a canned response, but it seems that that their customer service people are so hammered at the moment that they aren't even reading their incoming messages properly.

    I complained that they'd sold holdings in my daughters JISA to cover the fees DESPITE the account having their suggested minimum cash balance at the time. I suggested that they might therefore want to have a look at the amounts they are recommending because they don't seem to be right.

    They answered with a canned response justifying why they now needed to take fees, and that if I wanted to avoid it I should meet their recommended minimum. Ignoring the fact that I'd done so and that was the point of my message! Basically they didn't even read my message - probably just saw the words "sale of holding" and "fees" and assumed they knew what I was talking about.

    Very disappointing really and I'm glad I'm transferred out to be honest as they annoy me now. My daughters JISA is staying there though out of inertia, although I'm now wondering if that's a good idea.

    Edit: I should add that they reversed the forced sale so it wasn't all bad!!!
This discussion has been closed.
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