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Hargreaves Lansdown eyes slice of £2.4 trillion prize

New chief executive Chris Hill says platform is in 'pole position' to take a larger slice of savings and investment market.

 
Hargreaves Lansdown eyes slice of £2.4 trillion prize

New Hargreaves Lansdown (HRGV) chief executive Chris Hill has claimed the online stockbroker is in 'pole position' to grab a larger slice of the UK's £2.4 trillion savings and investment pool, as he outlined plans to usher in the platform's next phase of growth.

Hill's comments came alongside full-year results for the platform that brought little in the way of fresh headline numbers, with the company having issued most of the key figures alongside the announcement earlier this month it would be scrapping its special dividend.

Profits came in at £265.8 million for the year to the end of June, having been guided at between £265 million and £266 million two weeks earlier.

New business inflows of £6.9 billion and assets of £79.2 billion had both been announced earlier, as the stockbroker alerted investors that stricter capital requirements from the City regulator would force it to set aside more cash. The shares were flat at £13.56 on the news.

While Hargreaves Lansdown boasts a 38% share of the platform market for DIY investors, Hill pointed to the scope to make inroads into other areas of the UK's investment space, where it has a smaller presence.

'Pole position'

'In the wider accessible market of over £1.1 trillion, in which we already operate, we have a much smaller scale and an even smaller share of the relevant £2.4 trillion savings and investment pool,' said Hill (pictured).

'Our scale combined with our expertise and capabilities places us in pole position to be able to provide this help.'

Hargreaves has been building up its fund management business, launching its first funds investing directly in shares, HL Select UK Growth Shares and HL Select UK Income Shares , over the last 12 months and gathering £525 million in client assets. 

It now manages £8.8 billion in its full fund range, which also includes 10 multi-manager portfolios.

The Bristol-based business also operates a financial advice division, housing around 100 advisers.

But it is the plan to tackle the savings market that has most excited investors and analysts.

Savings plans

Launch of the cash management service has been pushed back to the end of this year. 'This has taken longer to launch then originally anticipated due to the significant technology development required,' Hill said.

'This is essential as we are determined that active savings must deliver the same levels of client service as our existing offering.'

Hargreaves had originally planned to launch the cash deposit service last autumn, and had targeted a launch in October this year as recently as February's interim results.

Shore Capital analyst Paul McGinnis said the launch could be 'transformative to the £700 billion-plus cash savings market, where Hargreaves Lansdown's current market share is zero'.

Numis analyst James Hamilton agreed, saying the savings proposition could provide 'another substantial leg for growth'.

Hargreaves said that as of yesterday it had not received a formal written assessment from the Financial Conduct Authority on its new capital requirements.

It lifted its full-year ordinary payout 20% to 29p however, and said it would continue to target an ordinary dividend payout ratio of 65% of free cash flow.

It added that future special dividends would be 'determined according to market conditions and after taking account of the group's growth, investment and regulatory capital requirements at the time'.

McGinnis said the tougher capital requirements were likely to lead to a more conservative approach to dividends.

'We would speculate that Hargreaves Lansdown may elect to keep its overall payout (ordinary plus special) a little lower than historic levels to preserve a buffer against future events of this nature,' he said.

45 comments so far. Why not have your say?

HR Man

Aug 15, 2017 at 11:35

Good news although I gather HL's IT issues are still ongoing in that anyone with Chrome cannot use their switch facility to transfer funds as it does not work with that browser anymore and HL are telling clients to change their browser! One reason why I am now leaving them to go to Fidelity where you can switch funds using any browser!

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PaulSh

Aug 15, 2017 at 12:54

@HR Man, whilst I appreciate that Chrome has almost 60% of the browser market, HL were actually doing you a favour in telling you not to use it. Anyone concerned about on-line privacy should switch away from Chrome, plus it's also quite power hungry so definitely not recommended for laptops.

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HR Man

Aug 15, 2017 at 13:22

But if the majority use Chrome (whether that is sensible or not) how are HL's clients able to transfer funds -why should they have to change browser because HL cannot get their system to work under it! You can do everything else on the HL website with Chrome (buy or sell funds) but you cannot do any switches?

Fund supermarkets should not be in the business of telling you what browser you should use!

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Law Man

Aug 15, 2017 at 17:32

I was very surprised to read that Chrome has 60% of the browser market, but Yes. MS Explorer has only 16.5% and Firefox 12.3%.

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thinblackduke

Aug 15, 2017 at 17:54

@HR Man - you think the above is good news but you are transferring to a different fund supermarket so you can switch funds using Chrome?! Might be considerably simpler to just use a browser that works? How often do you switch funds??

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Ian g via mobile

Aug 15, 2017 at 19:15

I will move the majority of investments from hl because of high charges as opposed to browser. Reading research that is irrelevant, out of date and biased to what they negotiate discounts on does not justify higher charges.

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Broomtree

Aug 15, 2017 at 19:16

I really don't see the need for an issue on browsers; I currently have the three main browsers because Sky for example no longer operates on Chrome and recently Firefox - Been with HL 12 years now and don't ever recall myself having a problem on any sort of funding - Don't know what Fidelity's site is like but HL is first class, although the app has proved 'clunky' recently

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HR Man

Aug 15, 2017 at 20:31

@Broomtree - have you recently tried to switch funds on HL using Chrome? You will be there for ages if you try

@thinblackduke -it is more the principle that a fund supermarket is determining what browser you should use-should not their IT department test out their tools especially on the dominant browser!

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Franco

Aug 15, 2017 at 21:55

Thank you for the information HR Man.

HL are ridiculous expecting the market to change to their system. I was thinking of opening an a/c with them and now I shall not. Whom the Gods would destroy they first make mad.- Prometheus-

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AJ via mobile

Aug 15, 2017 at 22:21

Funny but switching funds using Chrome work fine for me. But don't take my word for it..... DYOR

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HR Man

Aug 15, 2017 at 23:34

Yes it is a shame because in a lot of respects the customer service that HL give you (or in my case gave me!) is first class although you do pay for it. Fidelity is cheaper and with them I need not worry about having to change browser. You just would have thought that HL's IT gurus would have ensured that whatever tools they offer, can work under major browsers!

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Broomtree

Aug 15, 2017 at 23:38

Well I moved 4k from my ISA to bank last week with no problems?

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thinblackduke

Aug 16, 2017 at 09:56

Having to use another browser is a non-issue really. Just use what is best for what you want to do. For example, I've found that Opera seems to have the lowest overhead when streaming video. Lots of websites have issues with Chrome; for example bt sport and sky go won't work as they require silverlight. But it's no big deal - use a different browser.

@HR Man - did HL actually tell you that what you are trying to do absolutely will not work on Chrome or is it just that it didn't work for you and they simply suggested trying another browser? There will be lots of Windows/Mac/Browser combinations, so possibly it's just your particular setup that had an issue with that one thing? Maybe it's Chrome that need to fix the issue too?!

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horshamtim

Aug 16, 2017 at 10:24

There is still a case for buying HL shares - if you believe the current bull run in equities has further to go - but personally I have never been tempted into using their platform. This is due to their costs - if I moved from the other platforms I use it would cost me over 3 times as much in annual fees. As the other platforms work well enough, it is difficult to see how their service could be so far better as to justify the extra charge. The difference pays for my subscriptions to the FT/IC/MO, specialist software and still leaves about £1k to spend!

From the outset they have been expensive, and have also nudged people into OEICS and Unit Trusts because they (not their clients) make more money from these in the process. Before RDR they did not rebate the embedded commission unlike other platforms, and now their charge structures penalise people who hold these funds rather than ITs and ETFs, which usually perform better. The move to self managed funds is a further device for them to take more in fees.

Given that it is possible to access some of their additional information without having an account, the case for using them shrinks further.

So when articles such as this appear, which puts cracks in their much vaunted customer service claim, I do wonder why more people don't shop around. Inertia and the fear of change make a lot of people a lot of money in this and other financial product areas - just not the account holders!

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HR Man

Aug 16, 2017 at 12:53

@Broomtree- when I said the issue was transfer of funds, I was referring to the switching service between funds i.e. if you hold say Aberdeen Latin America and you want to switch to say MFM Slater Growth, you would use the HL switch service for that -except with Chrome, when you attempt that, all you get is the system trying to find any funds that match that search. No matter what fund you want to transfer to, it will not find anything!

@thinblackduke -after not being able to switch/transfer funds for 4 weeks, I e-mailed HL's Customer Service team who told me that that there was an issue for Chrome users and that their IT team had no date when they expected to resolve the issue. When I pressed them on that, they suggested I use a different browser instead.

It should also be said that there is nothing on HL's site -not even in their FAQs- to highlight that there is such an issue, so it is only when you try to do it that you discover the problem. It is now 7 weeks since the problem has existed and HL insist that they do not know when the problem will be solved -which I imagine is code for saying that they can't fix it. Hence why I am off!

Fidelty is cheaper than HL and I have worked out I will save around £250 a year by switching to them (they also cover up to £500 of HL's exit fees) plus you are not forced to change browser -what's not to like?

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HR Man

Aug 16, 2017 at 13:03

@Horshamtim- I had been a great fan of HL's prior to this IT issue and I think HL has been dominant amongst DIY investors because the range of their service was way above what other platforms provide.

For example, I was with Tilney Best Invest for a while but although they were cheaper than HL, they did not for example provide any reinvestment of income service for ITs or ETFs- they will just pay it out to you in cash and then charge you £10 if you want to invest that cash in buying extra shares of those ITs/ETFs!

I had a similar experience with Charles Stanley where their help desk struggled with most enquiries I made with them whilst HL's team answer calls almost instantly and have the answer to hand straight away - unless of course it is an IT glitch such as I have had to encounter...

My general point is that with platforms the fee you pay is/should not the most important thing- it is the service you are getting -what is the point of saving on fees if you don't get the service you want? Most assessments of investment platforms focus on one thing (cost) and they have yet to find a way of assessing customer service, which I would argue is the most important factor.

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thinblackduke

Aug 16, 2017 at 13:24

@HR Man - must have fixed it today! I can switch to Slater Investments using Chrome Version 60.0.3112.101 (Official Build) (32-bit). Or maybe Chrome fixed the problem with an update to their browser?

You certainly wouldn't be alone in suggesting a change of platform might save money (subject to amount, frequency and type of investments) but suggesting you've had enough of HL because of a teeny tiny glitch that doesn't exist today, probably wasn't their fault and could be resolved by simply using another browser, is somewhat irrational. I hope Fidelity live up to your expectations of perfection!

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Law Man

Aug 16, 2017 at 13:51

Re HL fund 'switch' facility: if there is a problem with the 'switch' button, is there any disadvantage in:

* click sell Fund A

* click buy Fund B?

This assumes you do it at a time of the day when the transactions are implemented at the same time. There would be a problem if the system did not recognise receipt of proceeds of sale of Fund. Until after it bought Fund B.

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HR Man

Aug 16, 2017 at 14:16

@thinblackduke-I have tried it again today (this will be the 13th such attempt!) and it still does not work (I have Chrome 60.0.3112.101 (Official Build 64 bit)- which is slightly different to your version? I kind of think that if you are paying around £1,000 a year in fees to someone that you should be able to use their tools with what is the most popular browser and now we are well into the 2nd month since the problem was identified with no resolution in sight- no?

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thinblackduke

Aug 16, 2017 at 15:19

@Law Man - it sounds like @HR Man is finding that after selecting the Fund Manager from the drop down list, it's not possible to select a Fund. I had no such issue with the 32-bit version of Chrome (same version but 32-bit rather than 64-bit), so the issue is either that 64-bit Chrome has an issue, it's an issue with Chrome running on the specific version of Windows (I have w10 v1703 Build 15063.540) or there are Chrome and/or Windows settings that are different. I would not consider this to be a HL issue, other than the problem exhibits itself on the HL website - it would probably occur on others too. It's appropriate to contact HL for assistance but it's very much an operating environment problem. If there is a workaround of using a different browser, IMHO that is an acceptable solution for doing something that is only likely to be very occasionally used. If the issue only occurred two months ago, I assume it worked before (or was never tried before?), so the difference is simply that Chrome issued an update that broke things? Or Windows issued an update that broke things? Or an anti-virus update broke things? etc i.e. it's not HL that made it stop working.

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HR Man

Aug 16, 2017 at 16:01

But it is not an issue that seems to impact on other investment platforms? Friends of mine who use other platforms are able to find other funds to switch to using Chrome including Fidelity and other pretty well known names, but not on HL. I have checked what version they have and at least one has said it is the same 64 bit version as myself (she and I are both Windows 7 users).

It is only a recent problem so I agree it must be down to either a Chrome update, one by Windows or perhaps a change HL have made -but for certain someone did something!

I would have more sympathy for HL if other platforms had a similar issue but that does not appear to my eyes to be the case -but HL don't even highlight that there is an IT issue at present and when I raised the issue with HL on a number of occasions there was not much empathy even when I told them I would be taking my money elsewhere

As I have said, Fidelity are cheaper, friends tell me that their service is a very good one and can do the things that I will need to do.

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thinblackduke

Aug 16, 2017 at 16:29

Different websites will be written using different technologies. HL happen to have chosen a way to filter their funds, which isn't working with your particular combination of Windows 7/Chrome/64-bit - I wouldn't be surprised if your anti-virus plays a part too! Operating system, browser and anti virus constantly get updates and that almost infinite variation can stop things working that used to work. I'd be very surprised if HL changed their code in this area. Windows 7 is out of main stream support with Microsoft (since Jan 2015!), so the likelihood is that no browser provider does any kind of testing with that old OS. You would probably find that if you had 64 bit Windows 10 and 64-bit Chrome it would work - it did for me - but then, if you upgrade, all sorts of other things you currently use may stop working!! If you have the latest of everything, software vendors are likely to respond with more urgency, as it's obviously in their interest to make sure they support the latest combinations.

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horshamtim

Aug 17, 2017 at 13:15

So an article about whether HL are going to further consolidate their position as the leading platform for retail investors, and will be able to push into other territory ended up as discussion about a technical glitch which may or may have been their fault. Ho hum.

Without repeating my previous comment, HL may be a good investment but they are an expensive platform to use and come out badly in all the price comparisons except for small portfolios. To justify their fees they have to offer a necessary level of service that others don't. Putting on one side the frills, the only issues that really matter are the range of investments you can trade in, and the ease of being able to buy and sell, and move money in and out. My two main trading platforms enable me to do all that at a much lower cost than HL when I want to. One of them has given me no problems - no need to contact their customer services - for over two years. The other has had two minor glitches in that time, neither of which stopped me from doing what I wanted to.

I profoundly disagree with the comments that charges are not important - in a lower growth world they will assume a greater and greater relevance. Even small differences in percentages on platform fees or fund charges roll up into substantial amounts. If I moved my trading activity to HL it would cost me about £2k extra a year. Over 10 years at my average rate of return, that would take over £33k out of my portfolio. Over 20 it would be nearer to £120k. I doubt whether there is anything on offer from HL that could compensate for such a difference.

Given that the two platforms I use between them in effect also give me free access to FE Trustnet and Morningstar resources, I have yet to hear any arguments which would justify such higher charges. As we see with the Banks, inertia and fear of change are powerful weapons that they can and do exploit.

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HR Man

Aug 17, 2017 at 13:46

I for one am not trying to ignore the impact of charges on investment returns but rather that focusing on cost only may be a 'false economy'. The difference between say HL and Best Invest for a 100k portfolio is about £100 a year- but unless you are very disciplined, that 'saving' with Bestinvest as an example, will not allow you to automatically reinvest any income from ITs or ETFs (they do not provide such a service)- and as we know, reinvestment of dividends make a significant contribution to investment returns.

There are also some cheaper platforms that take their service fee by selling units/shares that you own rather than in cash -that has the impact of reducing your return as if you have fewer units/shares, then your dividends will be lower, leading to smaller returns overall. Indeed Fidelity was one such platform and the main reason I have transferred to them rather than other platforms, is that they are changing that from next month to a cash based system.

I agree though that there is little point in paying top dollar for a service that you do not need and there are plenty 'cheap and cheerful' platforms/services like IWeb who will allow you to do the basic stuff -although I gather they do not accept any transfer of funds that are 'dirty' (i.e. still pay commission) so you might have to end up converting a good number of your funds before you can go to them?

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Mickey

Aug 17, 2017 at 14:13

Mmmm, Windows 7 no longer supported by Microsoft yet HL are expected to support it come what may :-) Either way I have had loads of companies tell me to switch browsers in the past, it happens sometimes and not just to HL.

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horshamtim

Aug 18, 2017 at 11:32

@HR I agree up to a point with your last comments - but it crucially depends on what you mean by "Customer Service". If you have to make regular contact with a platform provider's customer services there is something wrong anyway. In the end I am only interested in whether I can do what I want when I want online, and the total cost of the service. I agree that some providers try to increase their take by fees for different activities - but HL is no slouch in this respect either - e.g. If you want to do an in specie transfer out they will charge for each line of stock moved.

Investors Chronicle have done a series of articles looking at the comparative total costs of the different providers for ISAs, Trading Accounts and SIPPs which includes things like the annual fees, trading charges, payments, and ad-hoc transactions. These enable you to judge which what would be best for your size of pot, and level of activity. Last Friday's edition had such an analysis for Drawdown SIPPs.

HL come out towards the bottom end every time. As the size of the pots go above a certain point, those which charge flat rate fees annual fees really come into their own. My uncrystallised SIPP is with II and they have fees of £80 a year plus £20 a quarter, for which you get two free trades each time. There is no distinction between different types of asset, and indeed this portfolio includes a mixture of shares/ITs/ETFs/funds and individual bonds.

The other main platform I use is ATS for an ISA and a Drawdown, and generally I have no complaints although there are certain things they insist you write rather than email about, such as changes in payment levels. All three accounts are significantly cheaper individually on a total cost basis compared to the HL equivalents.

Nobody has yet been able to come back to me to explain exactly in what way HL is so much better than these alternatives to justify the extra costs. A reference to better customer services doesn't really mean much, particularly if someone hasn't used other platforms. It feels to me that there is an element of an age old con here - if you are paying more you have to convince yourself it's a better product, but it may just be better marketing. But hey, this keeps working for other products so why not for financial services!

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thinblackduke

Aug 18, 2017 at 12:29

You really have to look at everything in detail - account type (SIPP, ISA), amount invested in each individual type of investment, anticipated frequency of trading etc before you can make a decision on which platform suits you. I have my ISA with HL and it's all shares and IT's and I pay a capped £45 per year - that's it, no other costs unless I trade. I have a SIPP with HL too and that's all funds because I wanted to cut my teeth with funds and fund trades are all free. Now I have a reasonable amount invested and am fairly happy with my choices, I probably will be better off transferring to a fixed fee provider but then I lose the convenience of having everything visible on one platform. There are no drawdown fees with HL, so when I want to access my SIPP, I will probably be better back with HL.

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HR Man

Aug 18, 2017 at 15:04

I suspect that unless you have been with HL you may not appreciate the service they provide- for me (and as an ex client too!) their website is second to none, it allows me to do the things I need to do, for example you can easily access things like tax certificates etc whilst with other providers (Charles Stanley, Best Invest) it takes a lot of seaching and then I do end up having to ring them to find out how to find things!

There are also times when you do have to ring up to confirm something - for example the process to buy say a VCT (you cannot expect FAQs to cover every possible scenario)

As thinblackduke has said the capping of shares/ETFs at £45 a year (nearly 45% less than the iii custody charge by the way) is a real bonus as you can add more and more shares/ITs and hold them for free! iii would in addition charge you to buy it via their £10 purchase and sell tariff in addition to a commision and stamp duty I guess?

Also, iii seem to penalise people who are with them for more than 12 months as they do not charge exit frees if you are with them for the first year, but after that they levy £15 per line-that would seem to encourage you to leave them early? iii also seem to charge you £10 for ever purchase and sell, so that can soon add up if you are quite busy.

I would still argue that an outfit such as HL are overall 'worth it' - but as ever you pay for what you get

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thinblackduke

Aug 18, 2017 at 17:23

My funds are all low risk (if there is such a thing these days!) and with the amount invested and timescales before I hope to retire - five years. I reckon I could save approx £1200 in total by moving to III. I know that every little helps but that isn't a compelling enough amount for me to risk being disappointed by another platform.

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horshamtim

Aug 19, 2017 at 11:54

@HR Man and thinblackduke

Actually the HL annual fee cap on shares etc. is £200 not £45 - it is 0.45% of the value up to this point. I agree that a portfolio of £10k is not going to benefit from the flat rate charges on offer elsewhere.

The HL dealing charge on shares etc. is £11.99 a go online as against the £10 on II and £8.99 on ATS, so no benefit there.

The charges for in specie transfers out are £25 a line from HL as against £15 with II and £20 with ATS, so no gain there either.

With funds held in II and ATS you pay nothing extra apart from the fixed annual fee and the dealing charges - while you do get transactions "free" for fund dealing on HL, you are paying an extra uncapped 0.45% on top of the AMC for portfolios of up to £250k and 0.25% on the next £750k.

When I wish to crystallise a chunk from the II SIPP I simply transfer cash out to my ATS drawdown - having paid for the set up costs and with a flat fee there is no impact on the receiving end and there are no fees for changing the payments from the drawdown or taking the tax fee cash.

As a long term investor and using both these platforms for some time (ATS for longer) I have not yet found anything I need to do that I can't - and I also trade on foreign exchanges through them. I keep an open mind and am always interested to review the comparative rates. I accept that you don't want to make a habit of transferring such accounts regularly, but you do have to be aware of the providers trading on customer inertia. The last time I transferred - to II about 3.5 years ago - was due to a takeover of one of the platforms I was then using by another company with a very different approach to charges. One of the reasons I use three different platforms is to avoid being caught having to transfer everything in one go and having a period when effectively you can't trade or make deposits/withdrawals.

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citymoke

Aug 20, 2017 at 03:14

Talking about transferring funds to other platforms, I have recently moved 3 of my 7 ISA funds (2 unit trusts plus 1 investment trust) from HL to iWeb. I've calculated that I'll be saving approximately £350 per year as iWeb do not charge annual fees for holding ISA investments with them. The other 4 investments could not be moved as iWeb could not accept them in the form that they were held, so I either had to sell and re-buy those 4 funds (staying within my ISA folder) in another class and then transfer them or not transfer them at all. I decided to leave those 4 funds with HL as I am keen not to abandon HL completely as I may well utilise their services again and I'm not keen on changing the class type of those remaining 4 investments.

The transfer was not straightforward as the whole process ground to a halt on several occasions and I had to phone both companies many times to 'chivvy' things up so to speak. At the end of the day I was convinced that the hold up lay with iWeb and was caused by incompetent staff and interdepartmental communication problems! So, for something that should have taken approximately six weeks to complete took nearly double that time at about two and a half months!

In the end I managed to pin one HL employee down to chasing the whole process up and I must admit that he was excellent and he personally saw to it that the process was completed as soon as possible. I mean I was paying HL a £75 fee for moving the 3 items, so I just saw that I was paying for a service that I wasn't receiving irrespective of who's fault it was. I understand that there were some irate phone calls happening between the two companies in order to accelerate the process!

One of the main advantages that iWeb have over HL (apart from the money saved per year) is that iWeb's dividend paying procedure is superior to HL. HL pay my ISA dividends on the same day each month, so if a dividend from a particular investment is due on the day after that transfer date, I have to wait a whole month before I receive that particular dividend.

Not so with iWeb. They pay out immediately, whatever time of the month it is. I like that facility!

One thing which punters on here may or may not realise is that iWeb is NOT an investment platform. They are just a broker, but they utilise Cofunds as a platform facility.

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Mark Stringer

Aug 20, 2017 at 11:01

This all seems to be a case in respect of charges of "horses for courses".

I appreciate that extrapolating the effect of charges over decades seems a great sales pitch for financial advisors, but for many their age makes the 10-30 example irrelevant. I'm one of them. I am unlikely to be around in 20 years.

I wonder how long it takes to process a chart to compare all the providers then get the exact fund with the exact value, growth etc extrapolated over 10-30 years to see the effect of charges.

Of course all of these companies are only there for themselves, they are businesses. No business was ever started for the benefit of the customer.

I am sure that if I sat down for ages I could find a cheaper provider than HL but I am a low activist although getting more active recently so I am probably not a good example of how may charges affect me disproportionately over time.

Could be why I poor though!

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HR Man

Aug 20, 2017 at 11:39

Indeed- and I think one thing that assessment of charges does not take into account is that if you do your research and choose your fund manager carefully, you can find (as I have) that the charges are worth it- sometimes, you do have to pay a bit more for a consistently outperforming fund.

I paid for instance around 1.5% for holding Fundsmith in my old HL account but for that, the fund has outperformed its index by on average 15% a year each year- I have no problem paying an extra 1% over a passive fund if in return it delivers me an additional 14%!

MFM Slater Growth is anothe outstanding example - I was paying 1.3% a year for that fund but it has outperformed its index by 11% on average over the last 5 years

Ditto the Castlefield UK Buffettology fund -the charge for that was almost 1.7% but again it has on average outperformed its index by 16% a year.

What assessments tend not to show you is by how much your returns will be if you select and hold these kind of outstanding funds- instead of having say a 65% return over 5 years, you can end up with having a whoppiong 150% return-and that is after you have paid the higher charges!

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Mark Stringer

Aug 20, 2017 at 13:27

HR Man,

Good examples.

I have to admit that I have discovered much from reading these posts over the past few years, but tend to plough my own furrow.

My only concern about paying more currently being; are we near the top and if we knew that none of us would need to invest.

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thinblackduke

Aug 21, 2017 at 09:46

@horshamtim - it is capped at £45 in an ISA. It's capped at £200 in a SIPP.

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Junkit

Aug 21, 2017 at 10:39

I use Fidelity for my SIPP. I find their site quite poor, for example when I download a report on all transactions for a period, say the last 6 months, it cannot tell where the income has been received from.

I have 10 different funds and I want to check who has paid what, I have to request a manual analysis to get this info.

Also, one of their reports dates everything as 1st January 1900. A basic programming glitch that is beyond their capability to fix.

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horshamtim

Aug 22, 2017 at 11:10

@thinblackduke - my apologies. I was indeed talking about the SIPP charges cap. The charges for funds is the same as are the dealing charges. Having compared my ATS ISA charges, they still work out cheaper as I hold some funds - and the dealing charges are cheaper as well. While most of my ISA is invested in shares/ITs, the 0.45% charge for holding funds in any HL account is the potential killer. For anyone who mainly uses funds HL will be much more expensive whichever type of account you are using.

I am still waiting for someone to explain exactly what is so good about HL that you can't get elsewhere, which makes the higher charges worthwhile! Indeed in the above thread there are more examples of why other platforms can be better.

@HR Man - I really don't know where you get your figures for Fundsmith Equity. It has not beaten the index it is compared against (MSCI World) by 15% in any year since it was launched - over the last 5 years its annualised excess has been 6.5%. Against the S & P tracker I referred to the difference is down to about 2.5% annualised over the same period. My stance is that it this not enough for the extra risk involved. It has done better against the average global fund, but that just tells you how poor many of those are. At the moment it is down to quartile 2 over the last year even when compared to that average.

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thinblackduke

Aug 22, 2017 at 11:49

@horshamtim - My HL ISA costs me £6.25 per month - £75 per annum. That's cheaper than III (£80) and ATS (£120), so that's what is good about HL for me. Anybody that only holds shares and IT's must consider HL good value. BTW: The HL non-ISA share account is free for shares & IT's.

If you trade frequently and/or hold funds of a high value, the costs will be different and HL is unlikely to be as good. I am going to review ATS (and others) to see which is cheapest for my SIPP holdings which are mainly funds.

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thinblackduke

Aug 22, 2017 at 12:55

With my current SIPP fund holdings, I could save £90 with ATS and £170 with III. Transfer costs £25 per holding (I have 11 funds), so I would be better selling them all (free with HL) and transferring all in cash for a one off £25. To repurchase the same would be £110. I am hoping to retire in 5 years, so I would save £340 with ATS and £740 with III. Obviously there would be other calculations to be made in terms of taking my pension. I haven't seen costs of different providers when in draw down discussed much before. Would feel like a waste of time transferring, if HL are cheaper in draw down and I had to sell, transfer and buy all over again!

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HR Man

Aug 22, 2017 at 13:11

@horshamtim-the figures are from Trustnet - and I did say that on average Fundsmith beat its index by 15%. Over the last 5 years, Trustnet shows that it returned 165.5%- its index (IA Global) returned just 84.2%. That is a 81.3% outperformance by Fundsmith. Over 5 years that out performance works out at 16.26% a year. A 33.1% average return each year is not to my mind to be sniffed at!

The S&P 500 that you refer to is not an index that Fundsmith should be compared against as it is a Global rather than a US fund with around 40% of its assets based outside of it and around the world. However, a S&P 500 tracker would only have delivered a 126% return over 5 years a return of 25% a year on average - still outperformed by Fundsmith by a good 8% a year on average and almost 40% over the 5 year period!

I have no problem sitting back whilst Fundsmith delivers these kind of stellar returns - I would have thought a 40% outperformance is more than worth any extra risk taken on compared to leaving your money in a tracker that will simply follow the market up and down like a yo yo..............

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horshamtim

Aug 22, 2017 at 14:46

@HR Man - the IA Global average is not an index at all as I pointed out in my last post. It is merely a comparison with other OEICs in the same category - most of which failed to beat the relevant index! I am afraid your figures fall apart for this reason. As Fundsmith has more money in the US than the World index suggests, it is reasonable to compare its performance with both the World and US indices, particularly as the other 37% of the Fundsmith portfolio does not match the rest of the world index element - he has nothing in either Japan or Asia Pacific. The total return on my S & P tracker - including dividends - has given me just over 19% a year over the last 5 years, while the comparable figure for Fundsmith is 21.58%.

What this highlights is just how little even the more successful fund mangers tend to achieve above cheaper and safer investments. If you are holding onto Fundsmith because you hope it will repeat its previous performance in the next few years, good luck with that. Whether you like it or not, Fundsmith is primarily a punt on large US companies.

As I have explained on another thread that we have both contributed to, large concentrated open-ended funds carry particular risks in a downturn. I agree that trackers will also be at risk, which is why I have been taking profits and rebalancing the portfolio. Personally for growth I prefer ITs rather than funds - but then they tend to beat funds across most sectors and most time periods.

Given where we are in the economic cycle, I hold to the view that if you are likely to need any of the money you have in things like growth stocks over the next five years, it is sensible to consider de-risking your portfolio. There are likely to be opportunities to buy back in at lower prices in due course.

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HR Man

Aug 22, 2017 at 15:12

But you accept however that Fundsmith has beaten the IA Global benchmark that Trustnet uses by on average 15% a year?

Even if you were to use the S&P 500 benchmark, Fundsmith has still outperformed that by the best part of 3% a year on average has it not!

To be honest, any private investor worthy of the name should have funds in other assets such as commercial property, infrastructure, gilts and gold so any damage done will be limited - in 2007 I think my portfolio was down about 9% which avoided the need to sell any funds -any well balanced portfolio should do the same

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thinblackduke

Aug 22, 2017 at 15:21

I think everyone is in agreement that choosing the right investment far outweighs the 0.45% that HL take! Or the 60%+ that you just lost if you held Provident Financial. Good choice Mr Woodford!!

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HR Man

Aug 22, 2017 at 15:46

@thinblackduke - agreed. You do need to have a balanced investment strategy so that if you do hold a fund that for example holds Provident Financial (PF), that it will not impact hugely on you.

Fortunately, I don't think any individual fund or trust holds more than around 6% so they still have 94% of their portfolio to hopefully protect them- the biggest hold er of them is a a Jupiter IT but even their shares are only around 2% down overall despite the news of PF's 'disaster'!

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thinblackduke

Aug 22, 2017 at 16:45

My point really is that choosing the right investment, has far more effect on your returns, than which platform you choose to buy from. If you get it wrong, the fee you pay to the platform is pretty irrelevant.

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