Beware Hargreaves Lansdown customers - incorrect valuation of stocks

marcusjm

For HL customers, I wanted to highlight an issue with their system. They appear unable to value the blended cost of a current holding. It's ok if you've only bought, but if you've sold part of your holdings, the cost quoted is wrong.

I am been hit twice by this. I was holding WPP shares and sold when I hit a break-even point. It's only when I went to do my annual summary that I realised I'd actually sold too early and recognised a (relatively significant) loss.

I've spoken to their customer services and they've confirmed this is an issue. I cannot find anything on their website that highlights the issue to investors.  

marcusjm

JamesRobinson48 said:

So although your header references "incorrect valuation", your issue is not valuation but historic purchase cost. AFAIK the HL stock valuations are correct.

If you purchase shares, then sell part of the holding and perhaps purchase more, the quoted cost of your holdings is incorrectly quoted. They use a blended average to calculate the cost of the portfolio. 

My quoted cost was nearly 20% out from reality. 

marcusjm

	Qty	Price (p)	Value (£)
Purchase	10,000	43.3	4,330
Sold	(5,000)	59.1	(2,955)
Purchase	5,000	44.1	2,205
Total Calculated	10,000	35.8	3,580
HL quoted	10,000	42.7	4,270
Delta			19.3%

Above is a summary of one of my holdings. I've not managed to back calculate how they come to a blended cost price of 42.7p. 

wmb194

marcusjm said:

	Qty	Price (p)	Value (£)
Purchase	10,000	43.3	4,330
Sold	(5,000)	59.1	(2,955)
Purchase	5,000	44.1	2,205
Total Calculated	10,000	35.8	3,580
HL quoted	10,000	42.7	4,270
Delta			19.3%

Above is a summary of one of my holdings. I've not managed to back calculate how they come to a blended cost price of 42.7p. 

By my calculation, based on these figures your current average cost is 43.7p, 1/2 the first lot £2,165 + the second purchase £2,205 / 10,000. Your calculation doesn't follow the way you're supposed to do it for CGT purposes which I guess is what HL is trying to do. Selling some units for a profit or a loss doesn't increase or reduce the cost of the remaining units you own.

Broker figures can also be messed up by transfers in from other brokers so I never pay attention to them and make my own by keeping track with MS Money.

GeoffTF

iWeb, and no doubt the other HSDL brands, calculates the base cost correctly according to the HMRC rules. I had occasion to check that for a fund in my ISA yesterday.

You can never rely on broker valuations, except for the price you are quoted to trade. iWeb gives wildly incorrect valuations for my index linked gilts.

You also cannot rely on correct base costs. Corporate actions often result in errors. Vodafone's disposal of Verizon is a notorious example.

The one thing that you should be able to rely on is the amount of stock that you hold.

WYSPECIAL

marcusjm said:

For HL customers, I wanted to highlight an issue with their system. They appear unable to value the blended cost of a current holding. It's ok if you've only bought, but if you've sold part of your holdings, the cost quoted is wrong.

I am been hit twice by this. I was holding WPP shares and sold when I hit a break-even point. It's only when I went to do my annual summary that I realised I'd actually sold too early and recognised a (relatively significant) loss.

I've spoken to their customer services and they've confirmed this is an issue. I cannot find anything on their website that highlights the issue to investors.  

I think it happens because if you make several purchases, at different prices, then sell some which ones do they deem you to have sold? The most recent purchase or the oldest? The gain/loss column also doesn’t take into account dividends you have received during the time you have held them which I would consider a big part of whether a holding had made/lost me money.

wmb194

WYSPECIAL said:

marcusjm said:

For HL customers, I wanted to highlight an issue with their system. They appear unable to value the blended cost of a current holding. It's ok if you've only bought, but if you've sold part of your holdings, the cost quoted is wrong.

I am been hit twice by this. I was holding WPP shares and sold when I hit a break-even point. It's only when I went to do my annual summary that I realised I'd actually sold too early and recognised a (relatively significant) loss.

I've spoken to their customer services and they've confirmed this is an issue. I cannot find anything on their website that highlights the issue to investors.  

I think it happens because if you make several purchases, at different prices, then sell some which ones do they deem you to have sold? The most recent purchase or the oldest? The gain/loss column also doesn’t take into account dividends you have received during the time you have held them which I would consider a big part of whether a holding had made/lost me money.

Per UK CGT rules the answer is neither the most recent nor the oldest, your purchases are 'pooled' and an average price is used.

I agree, it's important to keep track of the total return and it's another reason I prefer to use MS Money to keep track and don't pay any attention to brokers' calculations.

GeoffTF

wmb194 said:

WYSPECIAL said:

marcusjm said:

For HL customers, I wanted to highlight an issue with their system. They appear unable to value the blended cost of a current holding. It's ok if you've only bought, but if you've sold part of your holdings, the cost quoted is wrong.

I am been hit twice by this. I was holding WPP shares and sold when I hit a break-even point. It's only when I went to do my annual summary that I realised I'd actually sold too early and recognised a (relatively significant) loss.

I've spoken to their customer services and they've confirmed this is an issue. I cannot find anything on their website that highlights the issue to investors.  

I think it happens because if you make several purchases, at different prices, then sell some which ones do they deem you to have sold? The most recent purchase or the oldest? The gain/loss column also doesn’t take into account dividends you have received during the time you have held them which I would consider a big part of whether a holding had made/lost me money.

Per UK CGT rules the answer is neither the most recent nor the oldest, your purchases are 'pooled' and an average price is used.

...except when the 30 day rule applies. Another exception is for old holdings which benefit from indexation and/or taper relief for some of the period for which they have been held. I would not trust any broker to get this right.

wmb194

GeoffTF said:

wmb194 said:

WYSPECIAL said:

marcusjm said:

For HL customers, I wanted to highlight an issue with their system. They appear unable to value the blended cost of a current holding. It's ok if you've only bought, but if you've sold part of your holdings, the cost quoted is wrong.

I am been hit twice by this. I was holding WPP shares and sold when I hit a break-even point. It's only when I went to do my annual summary that I realised I'd actually sold too early and recognised a (relatively significant) loss.

I've spoken to their customer services and they've confirmed this is an issue. I cannot find anything on their website that highlights the issue to investors.  

I think it happens because if you make several purchases, at different prices, then sell some which ones do they deem you to have sold? The most recent purchase or the oldest? The gain/loss column also doesn’t take into account dividends you have received during the time you have held them which I would consider a big part of whether a holding had made/lost me money.

Per UK CGT rules the answer is neither the most recent nor the oldest, your purchases are 'pooled' and an average price is used.

...except when the 30 day rule applies. Another exception is for old holdings which benefit from indexation and/or taper relief for some of the period for which they have been held. I would not trust any broker to get this right.

Yes, true, and don't forget the same day rule, either. Brokers have it harder than you'd think.