How safe is an investment with a consolidator like Hargreaves Lansdown?

aitcheff

Is it wise to invest a large amount with a single consolidator like Hargreaves Lansdown, or should one use several companies? On the HL website they have a page assuring investors of the safety of their investments due to adherence to various regulations, money being held on trust, beneficial ownership of Funds being the in clients' name, etc.

But if HL should find itself in difficulty, in reality would investors get their investments back?

Glen_Clark

aitcheff wrote: »

Is it wise to invest a large amount with a single consolidator like Hargreaves Lansdown, or should one use several companies? On the HL website they have a page assuring investors of the safety of their investments due to adherence to various regulations, money being held on trust, beneficial ownership of Funds being the in clients' name, etc.

But if HL should find itself in difficulty, in reality would investors get their investments back?

The only way you could lose your investments would be if there was a Madoff style fraud. I don't believe this would be possible with a plc like HL because too many people would find out about it. Madoff was able to keep it all to himself by doing business on a nod and a wink, just a few very rich clients suggesting to them they were benefitting from insider trading so they needed to keep quiet about it. Companies like HL are just the opposite broadcasting their services to all and sundry

Malthusian

If HL found itself in difficulty, the funds and shares you're invested in would still exist and the underlying companies would still exist. If HL was liquidated it is virtually certain that the client book would be bought by another platform, failing that the securities would be transferred into your own name.

The only possibility of investor loss from HL collapsing is the possibility that HL is a massive fraud, and instead of investing investors' money into their chosen funds and securities, it is actually pocketing the money while maintaining a fake online system that shows fake account values going up and down in line with the markets. The fact that everyone who has withdrawn their funds from HL has received 100% of what they were expecting is only because HL are keeping a reserve fund so they can keep the scam going a bit longer. The level of paranoia required to treat this as a serious possibility would be so high that you wouldn't be contemplating investing in the stockmarket anyway.

HarryFlatters

If you had a large amount to invest HL may not be the most cost effective option. Other platforms are available that do not charge a % fee.

Dird

Malthusian wrote: »

If HL found itself in difficulty, the funds and shares you're invested in would still exist and the underlying companies would still exist.

That assumes someone doesn't sell your shares and pockets the value while keeping your online account as showing they're still there. Assuming each share has a unique number & a specific share is matched to each account, it wouldn't come to light until drawdown or longer if you die & it's passed to family. Meanwhile some guy is cruising around on a boat

aitcheff

Thanks for the reassuring replies.

What are the lower cost platforms? I have used HL for years and I guess familiarity breeds complacency. I know that they are not the absolute lowest cost but I had thought they were reasonable.

dunstonh

I know that they are not the absolute lowest cost but I had thought they were reasonable.

They are one of the most expensive with the exception of small values. Tiered charges are common with others. So, the more you have, the cheaper they become. Also, many other platforms take your total holdings into consideration across tax wrappers and even family members. So, the combined values dictates what charging band you are in. That does not happen with HL.

They do have good software though. Better than many of the cheaper ones. Paying more is not a problem as long as the extra cost adds value.

george4064

aitcheff wrote: »

Thanks for the reassuring replies.

What are the lower cost platforms? I have used HL for years and I guess familiarity breeds complacency. I know that they are not the absolute lowest cost but I had thought they were reasonable.

Check out this website to compare brokers: http://monevator.com/compare-uk-cheapest-online-brokers/

There a few factors to consider when choosing which platform to go with:

1. Does the platform charge a flat fee or a % of assets?

2. What is the size of my portfolio? (this ties in with question 1).

3. What type of investments do I want to hold? (many platforms have different charging structures/rates for different asset types. For example sometimes holding shares/ETFs/ITs is cheaper than holding unit trusts on the same platform).

4. What are the dealing charges?

5. How often am I going to deal? (this ties in with question 4).

6. What kind of service would I like? (Same as with many other products, you get what you pay for). The cheaper platforms will generally have poor customer service, but more expensive platforms such as HL have fantastic customer service and a top user friendly website.

JohnRo

george4064 wrote: »

...HL have fantastic customer service and a top user friendly website.

I agree, I use the website proper all the time but have to say I find the HL account portal interface is a bit of a mess when it comes to clear presentation and retrieval of account info.
There are just too many separate components for my liking, spread over too many pages or nested within them for no obvious reason.

HarryFlatters

There are various fund comparison sites, personally I like this one but others are available

https://www.langcatfinancial.co.uk/white-paper/directplatformguide2016

ColdIron

HarryFlatters wrote: »

If you had a large amount to invest HL may not be the most cost effective option. Other platforms are available that do not charge a % fee.

This very much depends upon what and how much you have and in what type of account you hold it

For instance HL don't charge any fee at all for holding shares, Investment Trusts, bonds and ETFs outside an ISA/SIPP beyond the initial purchase cost (and this can be as low as £1.50 with monthly savings). Within an ISA the 0.45% fee is capped at £45 which for larger holdings is pretty competitive

For funds the 0.45% can be high, on £10,000 it's only £45 whereas on £100,000 the £450 is a bit eye watering. A fixed fee provider can often be cheaper but don't forget that there is often a trade off as they will usually also apply a transaction fee. 10 funds in a monthly savings plan is 120 trades a year plus rebalancing which is a sell and buy

I have a significant holding of ITs with HL that are long term buy and hold for income in their Fund and Share account and I think they are an absolute bargain given the quality of HL. They reliably pay dividends every month, supply an annual tax certificate and don't charge me a brass farthing. However I keep my funds elsewhere

You need to do your maths

aitcheff wrote: »

What are the lower cost platforms? I have used HL for years and I guess familiarity breeds complacency. I know that they are not the absolute lowest cost but I had thought they were reasonable.

Horses for courses as above

Plug your numbers into this site and try some what ifs

http://www.comparefundplatforms.com/