Hargreaves Landown charging more than big rivals for popular funds outside the cheapest Wealth 150+ says leading platform consultant

3rd March 2014

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A platform expert has suggested that Hargreaves Lansdown’s new pricing structure is more than the prices offered by many of its rivals for many popular funds.

Holly Mackay, the managing director of the Platforum, says that while HL comes in cheaper from its narrow list of the Wealth 150+, it is not as cheap for its wider list.

She says the reason is the fact that HL’s platform fee is set at 0.45% not 0.35% with the latter figure fast becoming the benchmark used by its rivals Fidelity Personal Investing and Barclays.

In a note on the charges, she says: “Hargreaves Lansdown is actually reliant on the new fund discounts – and channelling customers into this narrower range – to bring their charges close to their competitors.

“Clients who shop outside of the Wealth 150+ will be paying a clear price premium verses competitor services. There have been cheaper alternatives previously but it’s now more clear that there’s a premium to be paid for Hargreaves Lansdown’s highly rated service for those customers who do not ‘buy into’ the new core list of funds.

“Further to that, some clients will feel that Hargreaves Lansdown have sacrificed an element of impartiality by having recommended fund lists that are influenced by commercial terms”.

Average saving over the Wealth 150+ funds

£25k £50k £100k
Hargreaves Lansdown platform fee £112.50 £225.00 £450.00
Standard price of Wealth150+ funds (71bp) £176.39 £352.78 £705.56
HL price for Wealth 150+ (54bp) £135.65 £271.30 £542.59
Saving £40.74 £81.48 £162.96
Platform fee minus average saving (16bp) £71.76 £143.52 £287.04

NB: the above table does not take account of any tax due on unit rebates which would be payable for funds held outside an ISA or SIPP

Mackay also asks if the Wealth 150+ is any good. She says: “This question can arguably only be answered over the course of time – evidencing good fund selection is notoriously difficult.

“In the absence of a crystal ball, The Platforum has analysed the new core list against the buy lists of six rival direct platforms to see how it compares. Some clear points of commonality – and of difference – appear listed below.

At fund group level some big names are missing

No BlackRock funds

No J.P. Morgan funds

No Jupiter funds

No Henderson funds

Only one M&G fund appears – and not the typical suspects

And then at fund level:

No Aberdeen Asia funds

No Marlborough Special Situations

No Standard Life GARS

No Threadneedle Latin America

The note says that of the 27 funds, nine appear on Bestinvest’s shortlist, 11 appear in Charles Stanley’s Foundation Fund List, 12 appear in the Chelsea Core list and five in Fidelity’s preferred list. On average, on each of six rival direct platforms, 9.5 of the core 27 funds appeared.

It says Hargreaves does include what might be called blockbuster funds listed below.

Artemis Income

Fidelity Moneybuilder Income

First State Asia Pacific Leaders

Schroder Tokyo

Threadneedle European Select and

Threadneedle UK Equity Income

Mackay adds:“This shortlist certainly delivers some of the UK’s most popular funds to investors at preferential prices although we note a few names conspicuous by their absence. For existing customers, given that these funds have already been promoted via the Wealth 150, it’s probable that most customers will hold at least a few of these names and will see some savings which will bring their Total Cost of Ownership down. Nonetheless it’s unlikely to be by the full 17bps average lower cost cited.

“This change is more likely to benefit those new customers who are happy to be guided by the Hargreaves team and hold these funds exclusively. At that point the savings become more meaningful. Time will tell if the list of funds selected is the right one and we’d like to see Hargreaves publish performance data for its core list against the broader industry peer group moving forward. Of course we’ll have to wait a few years until this data becomes meaningful!”

Platform cost of holding £50k on the major direct to consumer platforms*

Interactive Investor £80.00
Halifax Share Dealing £87.50
The Share Centre £102.60
Charles Stanley Direct £125.00
AJ Bell Youinvest £129.70
Hargreaves Lansdown (with discount) £143.52
Alliance Trust Savings £165.00
AXA Self Investor £175.00
Barclays Stockbrokers £175.00
Fidelity £175.00
Rplan £175.00
TD Direct Investing £175.00
Bestinvest £200.00
Strawberry £210.00
Hargreaves Lansdown (without discount) £225.00
Chelsea FS £300.00
Willis Owen £365.00

* £50k invested in funds within an ISA with six transactions per year

Mackay adds:“You can bet that as we speak discretionary managers and other institutional buyers will be on the phone to the named fund managers in question. What remains to be seen is whether these deals are preferential pricing for Hargreaves or part of a general margin squeeze which will drip feed through to other channels and customers. For Hargreaves – unlike its customers – price today is a relative issue, not an absolute issue. These are nervous times for fund managers for whom this is a global, not just a UK question.”

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