Double Chargers: Hargreaves Lansdown wants investors AND fund managers to pay

Oh what a tangled web we weave ...

What can HL do that 99% of investors couldn't, with a bit of effort, do for themselves?

If Jeff in Sidcup can tell me how to avoid the initial charge on an oeic and get some trail income too without using HL or a similar platform that would be really useful.

The correct question is what can fund managers do that trackers can't? Other than a few very specialised areas, the answer is not much.

As for HL, they are just the platform, the interface between investors and investments, and as it happens, it's a very slick platform and even a jaded old cynic such as myself has been *very* impressed with their customer service.

I think Hargreaves are behaving in very bad taste. I for one am considering moving my portfolio -- & to cap it all one of their competitors is offering a £300 cashback to encourage me.

If others voted with their feet then maybe Hargreaves would do the decent thing

H_L should be exposed for the for what they really are, worse than 2nd hand car dealers. (Apologies to them)

Yesterday I transferred some funds which were exposed to a banking sector into others less so.

Today, I watched the process and saw how much it has cost me to do this.

I had timed the deal in order to benefit from an international time difference and prospective rates at he time.

They probably do the deal, then delay informing me, so they can choose the best execution moment to suit them the best, and me the worst.

Their execution times should be timed and recorded and made available.

Bunch of churners if you ask me.

Has anyone else suffered as a result of this kind of practice?

The whole financial industry is run by a bunch of gangsters, along with phone companies, ISPs, insurance companies, utility companies....etc...and the government of course.

HL as a discount broker are one of the good guys in the industry, not perfect I know.

Try going direct to a product provider !!

I was scary close to starting a new SIPP with HL: forms filled and wife asked to get cheque from building soc to kick it off, but she was too busy and we decided to leave it until after the weekend. The came the bombshell.

The £300 from Bestinvest is icing on the cake, as is the £500 (max) they will pay to exit me from a couple of dodgy old pensions. The core sponge is the Vanguard trackers with no trading fees in exchange for £120 a year.

Chardonnay, - re HL - you are a bit rude but you make an interesting point

I have often wondered about their funds transaction processes. Unlike share transactions which are ( almost ) immediate and transparent there is a delay of day/days when transacting funds. I'm not saying there is anything untoward except to note that I always seem to be disappointed when things shake down -i.e the price seems to have moved against me irrespective of the spread/deal cost. Is this just co-incidence ? My knowledge is incomplete but seems on the surface to be an opportunity to take advantage of investors.

Seems to me to be a pressing need to make this failsafe and transparent

Slow trading is the way of funds. If you don't like this aspect of them, or other aspects such as high TERs, patchy performance, and ephemeral nature, then you need to look at ITs, ETFs, and trackers.

As for going to providers, HSBC let you buy their trackers on a pretty good deal, and most ITs have a good regular purchase option. Funds will rip you off if you try and go direct, but I guess they have a business model to defend.

Moylando'

Sorry for being rude (ooer missus, It's just the way I hold me portfolio!) and thanks for being helpful.

Let's hope for some transparency but I doubt it will come from HL.

sgj...or whatever yer face,

After spending a long time on the dog & bone trying to buy a tracker direct from HSBC who didn't know what I was talking about, or, after several redirections, who I should be talking to, I went down to my branch for help. They spent another hour talking to and 'phoning colleagues who didn't know what they they were talking about or who to talk to either.

I ended up with a few print outs off their web site and a wan smile with a "Sorry we don't really deal with this stuff at branch level"

I find HL to much quicker at buying & selling funds than any of my other service providers. I always get the correct price and don't recognise HL from the description given by Chardonnay. Of course they aren't the cheapest at everything, they're a supermarket!

I've had an email from Bestinvest to say that within their new Self Select (online HL like) service none of the HSBC trackers attract a Custody Fee. (Note, they mention the normal UK All Share tracker, not the institutional version on the HL website). Similarly Legal and General Trackers excluding All Stocks Index Linked Gilt, and Fidelity Moneybuilder Index attract no charge so I assume they are getting some sort of platform fee from these funds, and not double hitting the customer. Of the other well known low cost trackers M&G and Vanguard do attract Custody Fees from Bestinvest.There are also other funds to that do, so you need to check the detail, but at least young small savers can gradually build up a portfolio of trackers without having to sustain a TER over 10% initially!

Through priviledged information, so I can't disclose, I am aware of one other discount broker planning to move away from Cofunds and set up their own platform which will make some sort of charge for zero commission funds, so we are seeing the start of a general change in the market that may initially be confusing.

@Moylando:

HL batch up and pass on all received Unit Trust/OEICfund buy/sell orders at 8am Mon-Fri. If, as is common, the fund's dealing point is later that day then any order made prior to 8am will be carried out that day (if you place and order after 8am then it will wait around until 8am the next day). A few funds have dealing points very early in the morning, in which case the order will wait with the fund manager for nearly 24 hours before execution.

If you are switching funds then the cash received on the day of sale will be held until 8am the following day, when it will be sent off to the other fund manager to purchase the new fund at its next dealing point.

So the overall switching duration depends on when you place the order and when each fund has its dealing point. It could take as little as 27 hours or as much as 5 working days.

It is possible to work it out in advance!

SSJ

You sound very informed. My point was not about timing but transparency - nonetheless you have provided a measure of assurance.

I have been aware of HL's high charges for sometime and moved my trading and sipp from them to TDW and SIPPDEAL respectively. I am glad that now others are also aware of the high price they are paying for so called good services.

Suggest disgruntled HL investors email Mr Grundie about this latest revelation as he clearly led clients to believe that the major reason for introducing these charges was due to "lack of a kick back from tracking fund managers" and transperency...seems he was being a little economical with the truth? HL seem to be getting more like the Banks each day!!!

@Moylando:

My information is all from their website - I'm not an insider, just a customer who likes to know what's what!

By the way, the 'dealing frequency' and 'valuation point' (what I previously called 'dealing point') are on the 'Key Features' tab of each fund's web page. If you don't read these ahead of a deal, you'll open yourself up to some nasty surprises.

Also, the 'as much as 5 working days' I mentioned was a worse case for daily-dealing funds: some funds (like CF Ruffer TR) deal weekly!

Leading on from dealing times on funds the one thing I dont like about funds as opposed to investment trusts is that you dont know what you will get. I suppose if yu are trying to pick a day when you will do well you can see how the US market closed and look at the early morning reports of how the ftse is epected to open. It seems to me its particularly difficult when market is so volatile. I suppose if you are selling a fund you have had a while and at a profit its not so bad but I would like to be able to time the price on the way into a fund. One thing someone may be able to put me right about - is the price based just on the underlying price of the shares in the fund at midday or is it more of a complex transaction than that?

You can't expect to time fund deals in line with micro market movements. They are long term investment vehicles. As has already been stated, the fund managers dictate their own valuation points and cause the delays between dealing and trading.

Anon3

Each fund fact sheet is headed with a dated sell/buy price which presumably changes at each valuation. Why shouldn't I expect to get that?

Because it is a historic price. This too is made clear on the fact sheet. You deal at the next available valuation point.

@Chardonnay - UTs and OEICs use a forward valuation system, so you get the price at the next valuation point. These vary from fund to fund, with most being at a fixed point on every week day, but some are weekly, or even monthly.

I tend to avoid funds, but surely the point of them is that you want the fund manager to be doing the trading and timing rather than trying to do it yourself? If you want that, why not start trading shares, ETFs, CFDs and futures?

Well said SSJ - most funds deal at a set time in the day and most platforms will have a timescale before which trades please will be traded on that day.

All you need to do is check with your provider to see what their trading terms are. If you place a deal at 2pm and again at 10am the next day it's not unlikely that they'll both trade at the same price (e.g. if the cut off is 11am for example) despite what's happened in the market in the interim.

If you're trying to trade against the market, you can only really do so if you know at what point the trade will be accepted and when it'll be traded at - thus creating the trade price - (as outlined above, this differs to shares (ETFs, ITs etc which trade in real time)

Furthermore, if the providers drag their feet and it's to your disadvantage, take them to task however from my experience most providers are pretty slick and making the trades given the implications if they dont!

I am a strong supporter of HL, and the idea of charging if they do not receive a 'kick-back' from the fund manager is perfectly acceptable. This latest revelation from HSBC is making me think my trust may be misplaced, and if I feel this way, many more will too.

Maybe now is the time for HL to step up, make a clean fist of things, stop obfuscating, and put their house in order, even if it means a u-turn. Otherwise, I think they will lose a lot more than small tracker fund investors.

This has moved beyond an internal financial management issue to a crisis of confidence.

I use the Alliance Trust platform.All commission refunded & buying & selling costs £12.50.

Have used them for years & found them to be excellent.

How does Alliance Trust make its money?

Rai1

Sorry not to have not answered your query sooner, I've been away. Anyway, try CommShare. They not only return all the initial charges, but also give you a share of the trailing commissions too. Another one is Seymour Sinclair Brokers, who I have found most helpful in the past. Neither of them spend anything remotely like that which HL do in promoting their services. I still get lavish brochures from them after making an enquiry to them years ago. You will be paying for them.

Alliance Trust is an Investment Fund Manager

Almost all mutual funds deal at midday every working day, model has been the same for years and is regulated. The times given by the platforms simply give them time to tell you the outcome

Since they are dealing in the fund assets on your behalf they have to have a point each day where they assess what trades in what assets have been properly completed and the price actually achieved so far, and then apply the rules to get to a valuation, having applied the previous days inputs and outputs from trades of the fund they then know the value of a unit.

It is in theory possible to value on a minute by minute basis, and therefore give a live market price, but in practice it might be very unfair to individual investors, this is a long term investment, so it is valued and dealt daily on aggregate

@ sgjhaghsdg (can I call you sgi?)

Thanks for that, I'm new to this but I think I've got it now.

It's rather like me picking something off the shelf in Tesco's and being charged a different price at the checkout. When asked why they say "The marked price is what it used to be, the actual price you pay is whatever the manager thinks it should be."

Hmmmm. Interesting concept.

Chardonnay - you are a cynic

Mutual funds are operated in a regulated market and in line with massive regulation. The price is calculated, not what the manger thinks it should be, the manager can not manipulate the price, it is a simple result of the market price of underlying assets

D G-H

Cynic? Moi?

Apologies if I'm boring other posters but why can't I deal at a marked price which I know instead of an unknown future one? Or is it a case of "Welcome to the opaque world of financial services, this is just how it's done'"?

I'm with Chardonnay.

Banks operate in a 'regulated market' 'in line with massive regulation'.

Didn't stop snouts in troughs to the extent they almost brought down the whole damn shooting match.

@seahound & Anon 3:

I started to use Alliance Trust too (to avoid HL's ETF & IT annual charges) but then reality hit them too and they now charge me £30 pa for my ISA. I suspect a very similar thing will happen to many of those planning to leave HL for seemingly greener pastures.

I have had an account with H-L for 8 years and have always been very happy with their service.

I also have an account with Alliance,the setting up of which was a far less smooth experience,and consequently i have not added to it.

The bottom line is this;

You cannot have `something for nothing` in this world and if you think you can you are either deluded or a socialist.

It is up to each person to decide what is important to them and act accordingly.

Most of my funds are in low-cost and totally transparent Investment Trusts,but as i say,each to his own.

@Chardonnay - why can't I deal at a marked price which I know instead of an unknown future one?

Because the price you see is the price at the last valuation point and not the current price. If you don't like this, then invest in other vehicles such as ETFs and ITs.

BTW, forward pricing worked very well for some when the tsunami hit as they got sell orders in for the funds, which then had to use a valuation point while the Tokyo markets were closed and hadn't had a chance to react.

Chardonnay

Moi aussi, mais ....

Not opaque in this case, simple and heavily regulated, if you said: it wasn't designed for very volatile markets and moving from one fund to another quickly, then you would be accurate, it is designed for long term investment. And if you want to find it the charges levied by the manager are transparent too.

If on the other hand you want to day trade, why blame the vehicle set for long term investment!!

Chardonnay, you simply don't understand the investment type it seems. Trade equities if you want to know what price you will be getting.

"best prices" Mr hargreaves? pull the other one!

Chardonnay

I have been with HL managed funds for over 20 years and I'm very happy with the situation. Particularly as a novice who knows little about trading, & I wouldn't know quite where to start. I

have been with other platform providers and came to HL by default really(e.g. recommendation by family) and I have to say they seem to be the most straightforwrd, has to be so that I can understand it..

I understand what Chardonnay is saying about being transparent but I'd be interested to know where you would suggest as an alternative???

Wouldn't mind knowing?

Forgot to mention that Alliance Trust charge 8p per day

I worry that H-L publicise a "Wealth 150" while at the same time accepting kick backs from certain institutions. Is there any way to find out what proportion of the heavily promoted "Wealth 150" list is made up of these high kick back paying funds? I've often wondered why Psigma Income have been so heavily promoted from day one when one sees its track record. Is there any connection?

Once RDR kicks in, platforms won't be able to make their money via a share of the AMC/TER, so punters will be able to see exactly who's getting what share of their money.

Well that's what it is supposed to do.

RDR doesn't in practice prevent intermediaries and platforms getting cheap shares in fund managers or other forms of incentives. Partic if they already own them.

It will improve, but it won't be perfect, roll on 2013!

AJMcG - what do you think?!

Far from getting "something for nothing" Hargreaves Lansdown already derive a four figure sum in trail commission from my investments with them.

I'm therefore not overly pleased to now learn that isn't enough and yet haven't had a letter to inform me. The extra amount is small but for the amount I already pay them I expect to get a decent standard of administration and the courtesy of a letter when they intend to put their hand in my pocket. Burying incomplete details in their dodgy junk mail that I would never read doesn't do it for me.

I don't mind paying for decent service but don't appreciate being covertly ripped off by spivs. I'll be moving and splitting my investments between Best Invest and to Cavendish who reimburse ALL commission. Glad I didn't transfer equities accounts to them.

I've decided to ditch everything I have with H-L because I feel that the situation is only going to get worse. Greed is a terrible thing. I'm moving to Selftrade and I'm getting rid of all fund investments as it would appear that the only people making money from them are the fund managers and the brokers who get kickbacks/commission

When trail commissions end, surely the big gains will go to the fund Managers?

you can't blame HL for wanting commission from somewhere, but surely the fund managers should then reduce the AMC, then no one loses.