View the article online at http://citywire.co.uk/money/article/a729584
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 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.
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.
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