Hargreaves Lansdown Portfolio Service

Sobryma

I read on Citywire that HL are changing fee structure, hidden in the article was the following statement:

Fees for Hargreaves Lansdown's portfolio management service have also been changed. The 0.75% plus VAT discretionary charge applied where third-party funds were used has been scrapped, while the headline management charges have been changed as following:

• for the first £250,000, from 0.45% to 0.51%;
• for the next £750,000, from 0.25% to 0.3%;
• the current 0.1% charge on assets between £1 million and £2 million will be removed.

This implies for > £100,000 you can obtain a discretionary managed portfolio for 0.45-0.51% + fund fees all in (advisory, platform etc.) so around 1.2%. If correct this seem very competitive especially compared to Bestinvest advisory/managed at 0.75-1.2% + fund fees so around 1.5-2.0%.

Maybe I have missed some hidden costs but looks an interesting move (if you want to use this type of service)

dunstonh

HL are also dropping IFA status and going restricted.

It seems that the big firms are finding it hard to run the systems and controls that the FCA are looking for without restricting things in some way. They are not the first to go down that route and wont be the last. I dont blame them. I would in their shoes too. However, it is a shame.

Sobryma

I think there may be an additional cost as well - ongoing charge for annual review is mentioned on link at .0.365%+VAT so its not really clear what total fees would be.

Its also not clear whether service works on managed or discretionary basis or advisory setup with annual review.

jamesd

Some of the hidden costs that you've alluded to will come from HL using their own funds in the service. At least they will be less blatant about it than imposing a penalty of 0.75% for not using their funds. Anyone using the service might want to consider including in their brief the requirement that "no funds under HL management will be used".

A bigger potential deal to ask them about under restricted advice is whether for income generation they include comparison with deferring the state pension. That'll usually pay much more than an annuity* but HL won't get commission on recommending state pension deferral. They shouldn't on annuity purchased with advice either but that won't help you if you're stuck with the usually lower income for life.

*there are possible exceptions, particularly for those reaching state pension age from 6 April 2016, including an age above 75, substantial ill health, not being eligible to defer or just having so much money that deferring for a long enough time isn't practical.

Sobryma

I've asked for details of what it actually would cost in total, as HL fund of funds aren't that bad (for their ilk).I bet it will end up close 1%+ hidden costs.

I have also seen that EQ Investors are launching this month Simply EQ service at 0.75% all in for a multi asset fund of fund service. I am not so sure on their track record though.

bigadaj

I'm not sure why many people would go for this form of intermediate advice though.

If you are happy to diy then do so and pay the minimum, if not why not pay an ifa. The ifa fees may be expensive to many people but there is the option of robo advice coming in for those with limited funds and contributions.

dunstonh

The ifa fees may be expensive to many people but there is the option of robo advice coming in for those with limited funds and contributions.

Many IFAs operate like robo advisers without a flash website. Although portals for IFAs are becoming more common. We are about to launch a portal for clients where they can view the investments we have arranged through various providers (where applicable) and view the funds, performance and have a tool to lookup investments which if they take a fancy, they can tag and ask the adviser for the opinion.

It really depends on how much robo or how much person you want but I suspect the most popular model will be the ones that can do both and I suspect most IFAs will be able to look robo (if they want to).

Sobryma

I got a reply and indication was it would more advised so there would be an initial financial advice charge dependent on complexity of 1-2%.

So it is not comparable to Bestinvest / EQ Investor or Nutmeg offerings which are really a cheaper variant of a multi manager or multi asset fund, and more expensive than my work SIPP for which I use an IFA.

bigadaj

dunstonh wrote: »

Many IFAs operate like robo advisers without a flash website. Although portals for IFAs are becoming more common. We are about to launch a portal for clients where they can view the investments we have arranged through various providers (where applicable) and view the funds, performance and have a tool to lookup investments which if they take a fancy, they can tag and ask the adviser for the opinion.

It really depends on how much robo or how much person you want but I suspect the most popular model will be the ones that can do both and I suspect most IFAs will be able to look robo (if they want to).

Well it's only really worth the robo option if the fees are lower, nothing about a flash website it's surely primarily about cost.

Financial advice Could be compared to clothing, and the majority of people are happy with off the peg rather than bespoke if it's something that pretty much does the job and is a fraction of the cost.

dunstonh

Well it's only really worth the robo option if the fees are lower, nothing about a flash website it's surely primarily about cost.

In the real world (outside of MSE where most people live) cost is not a primary consideration.

Financial advice Could be compared to clothing, and the majority of people are happy with off the peg rather than bespoke if it's something that pretty much does the job and is a fraction of the cost.

Most robo offerings cost the same ongoing as an face to face/postal/email adviser. With robo you are paying for the interface rather than the advice. Hence my belief that it will be the ones that can offer both the interface and the advice that will succeed.

bigadaj

dunstonh wrote: »

In the real world (outside of MSE where most people live) cost is not a primary consideration.

I think well have to disagree on this. In the real world if you have someone who is sufficiently interested in financial matters to be looking into advice then cost is going to be a factor for many, if they aren't interested in financial matters then they won't be.

Most robo offerings cost the same ongoing as an face to face/postal/email adviser. With robo you are paying for the interface rather than the advice. Hence my belief that it will be the ones that can offer both the interface and the advice that will succeed.

The limited review of robo I've seen is that the costs can be maintained at a low level if not a particularly low rate. As an ifa are you really going to take clients on with little or no initial lump sum and can afford to save a hundred or two a month or even less, surely your fees will preclude this? This is where the gap lies with financial advice and is arguably where it is most needed for both individuals and the government.