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Fidelity trumps Hargreaves in funds supermarket war

Fidelity has struck back in the investment platform price war, matching Hargreaves Lansdown's overall charges but doing so in a simpler way.

 
Fidelity trumps Hargreaves in funds supermarket war

Fidelity has struck back in the investment platform price war launched by Hargreaves Lansdown last week with a new set of tariffs that appear to undercut its rival and which it says are more transparent and simpler to understand.

Like Hargreaves and other stock brokers and fund supermarkets, Fidelity has been to told to 'unbundle' its pricing structure by the City regulator. Instead of paying for investment platforms through the annual management charge on their funds, investors must now pay two main charges: a fee to the platform and a lower 'clean' AMC on their funds.  

Single platform fee beats Hargreaves ...

Fidelity Personal Investing, which offers access to more than 2,000 funds, has declared a single platform fee starting at 0.35% a year for people with up to £250,000 on its platform. This is cheaper than the 0.45% unveiled by Hargreaves.

In an important difference from Hargreaves, once an investor passes the £250,000 threshold the rate falls to 0.2% on the entire account. By contrast, Hargreaves will charge its lower tier of 0.25% only on the money above £250,000.

And Fidelity's service fee applies to all money held on its funds supermarket. This is another difference to Hargreaves, which has been attacked by some investors for hitting them with multiple fees linked to whether their money is held in an ISA, Sipp (self-invested personal pension) or a general investment account.

Mark Till, head of Fidelity Personal Investing, insisted there would be:

  • no additional product fees for ISAs and Sipps;
  • no charges for changing funds;
  • no charges for dealing by paper or by phone;
  • or requesting paper valuations;
  • no exit fees if customers switch to another platform.

All this marks Fidelity out from its Bristol-based rival, whose customer booklet listed 73 separate lines of different charges, including fees for paper valuations and higher exit charges starting on 2 June.

'The defining point is how much money you have with us, not whether it is in a Sipp, ISA or general investment account,' Till (pictured) said.

However, there is not so much difference between the two on the treatment of shares and investment trusts. Investors holding these on Fidelity's ShareNetwork currently pay £5.10 a month and a flat £9 per trade. This is similar to Hargreaves, although last week it angered investment trust holders by placing them in a separate product category outside shares, meaning that some customers holding shares and investment trusts will pay two sets of fees, capped at £45 for trusts held in an ISA and £200 if in a Sipp.

Holders of Fidelity's five investment trusts can count them towards their total balance on the funds supermarket, however, which will help some to get the lower 0.2% platform rate.

But fund charges bit higher than Hargreaves

On fund charges, however, Fidelity looks to be slightly less price competitive than Hargreaves. The average annual management charge (AMC) of the 140 funds in its Select List (the equivalent to Hargreaves' Wealth 150) is 0.64% whereas Hargreaves claims to have negotiated 0.54%.

The overall effect of the two charges leaves Fidelity and Hargreaves broadly matched, both charging 0.99% a year for investors buying funds from their recommended lists.

'Spat' between expensive providers

Justin Modray of Candid Money, the platform comparison website, denied this was a price war as beating Hargreaves's platform fees was not difficult for Fidelity and that its 0.35% still looked expensive compared to smaller, cheaper providers. 'This is more a spat at the more expensive end of the market. Investors who want to use the Fidelity platform would likely be better off accessing it via discount broker Cavendish Online for 0.25% a year.'

'However, Fidelity is likely to prove cost effective versus the competition for smaller Sipps, thanks to no additional annual Sipp fee,' he added.

Modray also praised Fidelity for not locking in customers with exit penalties.

Improvement

Although Modray is right to point out that Hargreaves and Fidelity sit at the top of the market, their new charges do represent a big price cut. Previously investors had to pay AMCs of around 1.5% for funds investing in shares on their platforms.

Some of Fidelity's cheapest fund deals do sound competitive with Hargreaves, however. It said it offered tracker funds with AMCs as low as 0.09%, bond and gilt funds starting at 0.15% and with some active funds on just an 0.2% annual charge.

Fidelity claimed that a customer with £10,000 in an ISA holding funds from Fidelity's Select List would pay an average of £99 a year, down from £175.

It said its 253,000 direct customers in the UK could continue to benefit from the guidance provided by its 350 investment professionals worldwide. Mark Till said it was not in the business of giving advice, however.

Stressing the all-in nature of its platform charge, Till claimed: 'We don't believe an investor can build a balanced portfolio for less.'

The new charges will take effect on 9 February ahead of Hargreaves' launch on 1 March. Similar to Hargreaves, Fidelity customers can choose to remain on the old 'bundled' charge if they prefer but new investments will be made into 'clean' fund share classes under the pricing structure.

37 comments so far. Why not have your say?

Jamie J Davis

Jan 22, 2014 at 13:34

'Investors can continue to hold investment trusts with Fidelity without incurring a platform fee.'

'Shares held on the network will continue to pay £5.10 per month'.

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Gavin Lumsden (Citywire)

Jan 22, 2014 at 13:53

Thanks Jamie, I've revised that bit to make it clearer. Looks like there isn't so much difference between HL and Fidelity on investment trust charges.

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P L

Jan 22, 2014 at 14:11

Given Cavendish white label Fidelity and as far as I can tell provide an abslutely identical server but charge only 0.25% (0.20% + 0.05%) why would you invest direct with FIdelity at 0.35%. The obvious move is simply to switch broker when you breech the 250K barrier.

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Clive Estall

Jan 22, 2014 at 14:33

Gavin - do try to be correct and consistent with the facts.

RE On fund charges, however, Fidelity looks to be slightly less price competitive than Hargreaves. The average annual management charge (AMC) of the 140 funds in its Select List (the equivalent to Hargreaves' Wealth 150) is 0.64% whereas Hargreaves claims to have negotiated 0.54%.

NOT SO - the 0.54% rate only applies to 27 funds! See your own article by Gavin Lumsden on Jan 15, 2014 at 17:20

Unit truts and Oeics that are on the Wealth 150 list of recommended funds will benefit from a lower charge, typically 0.65%, says Hargreaves Lansdown.

In addition the company has negotiated special deals with investment groups for 27 ‘favourite’ funds it is labelling ‘Wealth 150+’. For these the average AMC falls to 0.54%, a 0.16% discount to the standard market charge, it claims. The identity of these funds has not been revealed yet.

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Richard68

Jan 22, 2014 at 15:17

Lower platform fees but higher fund fees. I'm finding it difficult to compare two similar investments. What i could do with is a view of the total charges which will effect my return so that i can do a straight forward comparison. In effect a single, bundled ......ah!

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Rob Walker

Jan 22, 2014 at 15:50

While there are some marginal benefits in either platform, it is unlikely that fees would ever be so low if it wasn't for HL's competitive and increasingly popular service during the last five years. Compare this to the way brokers and FA's milked their clients' accounts in the past and this is a huge step forwards.

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Spartacus

Jan 22, 2014 at 15:56

Does Brian Cox or Steven Hawkings come on here? Think even they'd struggle to fathom out HL's charging structure..

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Ricardo

Jan 22, 2014 at 16:05

This reminds me of the confusion that arises when trying to compare the many different charges levied by utility companies. When, oh when will the financial regulators demand simpler charging structures so that investors can compare like with like?!

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Malcolm

Jan 22, 2014 at 16:05

What about other fees?

e,g. Fidelity SIPP Flexible drawdown: We will charge £300 per annum

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Gavin Lumsden (Citywire)

Jan 22, 2014 at 16:06

Clive, I take your point. In fact in my article I on Hargreaves I said they were claiming an average AMC of all funds on Vantage of 0.71%. However, I haven't go an equivalent figure from Fidelity.

Nevertheless, I think HL does look more a bit cheaper on funds simply because they've announced that 'super clean' rate of 0.54% as well as the average Wealth 150 AMC of 0.65%. Fidelity just beats that with a Select AMC of 0.64% but it hasn't announced a super clean rate.

But trying to get away from the blizzard of figures the broad point I'm trying to make is that if Fidelity's platform fee is cheaper than HL and they both end up with an overall AMC of 0.99% for funds bought on Wealth 150 or Select then it implies that Fidelity is a bit more expensive on funds.

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Andrew Hannay

Jan 22, 2014 at 16:14

Just to open up the debate Nucleus have always charged .35% up to 250k....clear and transparent offering a huge range of clean share classes. No other costs except for share dealing and these are competitive too.

I have no doubt too that vast sums will roll into the white list funds.....how will they cope I wonder?

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Clive Estall

Jan 22, 2014 at 16:16

Thanks Gavin

But I still dispute the HL average of 0.54% on their "Wealth 150" list - not even HL have tried to claim that. Instead they claim an average of 0.54% for their "Wealth + " list (which comprises 27 unknown funds)

What all this does show is that all players are using smoke and mirrors to obfuscate matters. Given the underlying driver for RDR, namely transparency, I'm surprised the FCA is not taking a closer look at the "platform specific" classed being negotiated. As these and many other threadss highlight, such differences make comparisons nigh on impossible (ie no transparency).

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Linda Green

Jan 22, 2014 at 16:23

On Cavendish Online's website it says they are not offering a SIPP at the moment, but are working up a new product soon.

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JohnR

Jan 22, 2014 at 16:33

That's a pertinent point you've made Clive, what and where are the FCA in steering this chaos, because the theme of transparency and explicit charging clarity that is supposedly driving the RDR is, in reality, rapidly descending into a confusing, convoluted, shambolic free for all and little if anything is better than it was before and certainly no clearer.

It seems quite obvious the financial services industry is of a type and largely incapable of abandoning the sneaky backhand commission culture and fully embracing the kind of integrity and transparency towards customer charges that I suspect the RDR set out to impose.

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douglas gordon

Jan 22, 2014 at 16:50

See Fidelity's website >

They state:

How do Fidelity’s charges compare with other platforms?

We are in the process of creating a tool for our customers to compare the charges of other major platforms. This tool will be available on our website in due course.

HL made the first move here - 1st to stick their heads above the parapet. Now the next biggest player has stepped in, obviously looking to benefit - they'll have been furiously doing their calculations since HL showed their hand.

Looks like they'll beat HL for some clients with Investment Trusts (particularly those with a SIPP) - and, oh to have the £1 000 000 to avoid fees at all!

I'll do my decision making using Fidelity's comparison tool and a judgement about comparative service - personally I like HL and will stay unless it's significantly cheaper elsewhere. I must say however that Fidelity's charges are much simpler.

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JohnR

Jan 22, 2014 at 16:56

You pay fees on the account balance in each tier, it doesn't mean it's free if you have a million...

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David Chapman

Jan 22, 2014 at 17:03

I have my investments with Close Bros AM [Ex Chartwell] - it will be interesting to see their new charging structure, there have been no hints as of now [unless I have missed them !!!]

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Hmmmmm

Jan 22, 2014 at 17:16

Douglas Gordon - that is wrong in so many ways eg

- HL were not the first to move, by a long way (almost the last)

- HL are not the bigger

- You dont avoid all fees if you have more that £1M. Just fees on the amount ABOVE £1M

The most attractive thing about the Fidelity offering is no exit fees. I think I will stick with/move to them until the dust settles, then re-evaluate. Having more than £500K makes Fidelity better value than HL anyway you cut it (0.2% charges). I just wish their website was better/faster!

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Jayanti Gandhi

Jan 22, 2014 at 17:50

In H_L fund and share account there is no annual charge for this account. The charges are for various caategories of investments held in this a/c. Eg Funds value charge 0.45%, & investment trusts. BUT no charge for shares,etf, bonds,gilts.

In my opinion City wire article would have been better understood if it was written by different type of vantage accounts eg ISA,Sipp and fund -share account and then the different type of investments with in each account

I founf Citywire articles create more panic-misundestanding. I therefore read H_L booklet about the new charges

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Franco

Jan 22, 2014 at 17:53

It is as clear as a pikestaff that Fidelity beat HL on charges, simplicity and transparency, hands down, but the writer is trying to make it a close contest to please the biggest advertiser. But for UTs, cheapest of all is Fidelity via Cavendish on Line. End of story and of complications..

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Mickey

Jan 22, 2014 at 18:24

Don't you need a different a/c for IT's etc with Fidelity, I thought they were only offering their Fidelity IT's through the fund a/c?

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douglas gordon

Jan 22, 2014 at 18:41

Hmmmm

Sorry if the number of "m"s is wrong, I didn't count them :)

I stand corrected on the £1M bit - I didn't pay close attention to it as it doesn't affect me! That was just a throwaway remark intended to be humorous.

As for the other things that are wrong - I'd say you are nit-picking! HL was the first of the major companies to show their hand (certainly the first to cause such a furore!) - Fidelity was clearly keeping their powder dry! I'm not taking sides!

Your reference to Fidelity's website is one of the factors that I'll consider when looking at comparative service - to me value means much more than cost!

By the way - even £500K is out of the league that many of as "play" in! So, Fidelity's comparison tool should be useful for each of us to make up our own minds. It will be a matter of horses for courses, I'm sure. Which best suits you won't necessarily suit me or many others.

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Clive B

Jan 22, 2014 at 19:47

@ Franco

"But for UTs, cheapest of all is Fidelity via Cavendish online"

I'm with Cavendish/Fidelity FundsNetwork, but it occurs to me that for "big" investors (> £250K), once trail commission ends, so will Cavendish's ability to give AMC rebates. Then, I would see no benefit in using Cavendish

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ynys

Jan 22, 2014 at 21:36

From Fidelity website:

'Please note that the ISA manager for the ShareNetwork ISA is Charles Stanley and not Fidelity. You will not be able to hold a Fidelity ISA and a ShareNetwork ISA in the same tax year'

Does this not mean that with Fidelity you must opt for either funds OR shares?

Meaning that if you want to hold shares and (open ended) funds

You need HL whereas if you hold only funds you may be better off with Fidelity?

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Hmmmmm

Jan 22, 2014 at 22:34

I think that is true, Clive B.

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Dick E

Jan 22, 2014 at 23:02

Are there HL (for instance) user-groups which could provide significant combined volume/power to negotiate discounts on costs? If not why not?

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Fund of Funds

Jan 23, 2014 at 14:31

Well after studying the new HL and Fidelity charges in detail I am going to transfer from HL to Fidelity. For those with a larger investment spread between SIPPs, ISA and non ISA accounts you will be much better off. I think it is appalling that HL do not base their charges on the total amount in you HL accounts. They could also base charges on husband and wife investments. Their new charges on Trusts are also not on. HL should have come up with a much better simpler system. They are too busy trying to maintain their share price, they have taken too much off their investors for too long.

I agree with Dick E that it would be good to start user-groups with the various platforms so that we might be able to exert power or even move over to a different platform as a group if the fees were right.

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ynys

Jan 24, 2014 at 01:08

If u were prepared to sell some funds and buy individual shares eg BT BP etc then although there are initial dealing charges this will be offset by the fact that individual shares unlike funds have NO annual management fees and the most HL can charge is 45 gbp per anum - a 100,000 gbp fund isa will charge at least 1,000 gbp per anum. Now whilst there are other brokers which supply share ISAs, I am not sure which brokers other than HL do BOTH shares and funds in same ISA, if that is important (TD Direct I think maybe). A good article pointing out what is available post RDR would be great.

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douglas gordon

Jan 24, 2014 at 10:10

Hmmmmm

"The new charging structure appears to be a direct challenge to Hargreaves Lansdown, the biggest platform in the UK ....."

(Fidelity undercuts Hargreaves Lansdown with new fees - Money Observer, 24 January 2014)

Perhaps more than I am misinformed?

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Hmmmmm

Jan 24, 2014 at 10:55

Indeed. Depends how you define 'biggest' but:

"Fidelity is one of the UK's largest investment fund managers with over 660,000 customers in the UK. We look after assets worth £165.3 billion and are dedicated to achieving the best possible returns for our investors"

Hargreaves Landsdown: "As at 30 September 2013, our Vantage Service had over 520,000 clients holding £37.0 billion of assets. In total we had £39.3 billion under administration or management on behalf of private investors. "

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douglas gordon

Jan 24, 2014 at 11:26

douglas gordon

Jan 24, 2014 at 13:35

Really depends on what you are measuring, I think.

The organisations have a different scope of activity.

In the context of these discussions I'd say we are referring to "platforms" but what does it matter - as they say "Size isn't everything!" :)

What really is important is "Where are each of us going to get the best deal?" For some it will be one provider I suspect and for others another!

Hope you all find the best one for you :)

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douglas gordon

Jan 26, 2014 at 10:29

I've looked at Interactive Investor and can't see anyone beating them on cost. I'm seriously thinking of heading their way! I've used them for research etc for a while and am quite happy with their website.

Suggest you check them out.

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john_r

Jan 26, 2014 at 12:16

Money Week recently (Jan 24th) published an article on how to cut down on brokers fees after confirming that no one broker fits all. It considers 'You Invest' (nee Sipdeal), 'Interactive Investor' , 'I Web' and 'Stocktrade' as providing the most competitive options to consider depending on individual portfolios and styles of investing. For those with Sip accounts it claims 'You Invest' as the lower cost Sip provider for most stock portfolios.

Personally I use two brokers - Firstdirect (holding isa and dealing a/cs) and 'You Invest' (holding isa and sip a/cs). First Direct doesn't do open ended funds. Both brokers have very simple charging structures and no charges for holding shares or investment trusts. How refreshing - I'm staying put!

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Moylando

Jan 26, 2014 at 12:52

I have a vested interest in ( name company) I think that ( named company) is better than ( other companies). I can bore you anywhichway with numbers that will prove that (named company) is better than (other companies)

Delete as appropriate. I think that HL have i) done wonders for private investors over recent years

or 2) are rubbish who are going to get their comeuppance or 3) are probably OK

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Broomtree

Jan 26, 2014 at 20:47

HL have missed a trick here, they have built trust over the years by appearing to be upfront and seeking to look after investors.....we have all had our doubts since they went public but now we have confirmation...profit matters more.

I thought I had found a platform for life, was in the process of helping my children start to use it.....no it appears we are back to 'super-market wars' simply chasing the best deal.....hmmmm hardly what one expects or wants with your savings provider and holder of your pension....

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dave ifa

Feb 06, 2014 at 15:11

So having tiered charges on platform/product fees, having some funds in one range "clean" some funds not "clean" some with rebates , some without, additional charges for certain asset types but not others, charges for additional asset types held within ISAs all constitutes "unbundled, clear and transparent"

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