Citywire for Financial Professionals
Share this page:
Stay connected:


Citywire printed articles sponsored by:

View the video online at

The beginner's guide to fund supermarkets

Sponsored By:

Using fund supermarkets to buy investments for your ISA and pension was meant to be easy but a price war has muddied the waters.

by Gavin Lumsden on Jan 29, 2014 at 15:07

The beginner's guide to fund supermarkets

'Fund supermarkets' are businesses that sell you funds cheaper than if you bought them from fund managers direct.

The financial regulator has ordered these companies to change their charges. For the first time investors pay directly for the services of their fund supermarket even though, overall, many will now pay less!

This video explains what is happening and why.

The Lolly Investor Programme is a weekly series aimed at beginner investors. You can watch earlier videos in the series here.

Can't watch now? Read my script instead.

We're used to hearing about price wars between the supermarkets, now for the first time the same thing is happening between the companies that sell funds to us.

This month, Hargreaves Lansdown, the country's largest fund supermarket, cut its prices and was soon followed by Fidelity, a big rival, with a similar big reduction in its charges.

Other fund supermarkets are changing their prices too ahead of an April deadline set by the financial regulator.

The good news is most people should find it cheaper to invest in funds in future.

For example, a person investing £10,000 in an ISA in funds where Hargreaves or Fidelity has arranged special deals will pay an average of £99 a year. This is down from around £175 with Fidelity and down from £133, a big saving.

But those are just averages.

In practice what you will actually pay will depend on several factors: such as,
• how much money you have with the funds supermarket,

• whether it in is one account or more and

• what sort of funds you buy.

Hargreaves Lansdown and Fidelity are just two of a growing number of fund supermarkets, each with different charges, making comparisons between them difficult.

Over the coming months it will be possible to do more precise comparisons between the different fund supermarkets.

In the meantime I’ll explain some of the basics so you can keep up with the changes.

First of all what is a funds supermarket?

What it sounds like is the short answer.

Fund supermarkets is the new name to what used to be called discount brokers.

These are businesses selling investment funds at a cheaper price than if you bought the funds direct from investment groups.

Fund supermarkets offer thousands of funds from dozens of different fund groups. This means you can manage your investments in one place.

Fund supermarkets don't have stores. Most of the business is either done online or through brochures mailed to customers.

The price war is revealing to many supermarket customers how much they pay when they invest and who gets their money.

Until recently a person using a fund supermarket to put money in a fund investing in shares would pay an annual management charge of around 1.5 per cent.

That was split in two: with half going to the funds supermarket and up to half going to the fund management group.

However, some supermarkets took some more money off the fund manager and rebated or gave it back to customers as a loyalty bonus. This reduced the overall cost but still didn’t make it clear how much money the supermarket was making.

All that's changed.

The financial regulator disliked this system because it was unclear.

It ordered the fund supermarkets to ‘unbundle’ their charges.

Now investors will have to pay two sets of charges:
• a new annual fee paid to the supermarket. This can either be a fixed annual fee or a percentage of your money.

• On top of this they’ll pay a smaller annual charge to the fund manager, starting at around 0.75%

Some people are calling this fund charge ‘clean’ because it no longer includes the payment to the supermarket.

Some of the supermarkets, like Hargreaves and Fidelity, have gone further and arranged lower fund charges on a select list of funds. These have been nick named ‘super clean’.

It’s these ‘super clean’ charges that have enabled the big supermarkets to claim investors can get an all-in charge of 0.99%, considerably cheaper than before.

As you can tell, it’s all about as clear as mud.

So here are some tips to consider when looking at fund supermarkets:

Work out what kind of supermarket you want: Hargreaves Lansdown and Fidelity are undoubtedly  more expensive.

Smaller supermarkets such as Charles Stanley, Clubfinance and Cavendish Online charge around 0.25% a year, which is a lot cheaper.

But they may not offer all the online tools you might want to help you choose funds. Their deals on fund charges are likely to be non-existent or not as good as the big supermarkets.

Watch out for additional charges. I’ve described the two main charges but there can be a wide variety of extra fees depending on which company you are looking at.

If you like to invest in other kinds of investments, such as investment trusts, shares or exchange traded funds you will be charged more by some supermarkets than others

As I said, making comparisons is going to become easier.

The good news is that investing in funds has got cheaper, just not simpler.

19 comments so far. Why not have your say?


Jan 29, 2014 at 18:40

Keep going, Gavin. Analysis most welcome as this maze continues to develop. "Clear as mud" is appropriate. Have read HL's wee booklet four times. Am loosing the will to live. May well wind up "gaming" the alternatives. OIECs one place, ITs some other place, etc. Not simple, specially looking after family members ISAs, SIPPs, Vantage Share A/Cs. And how in hell does one explain/try to encourage potential young first time savers to invest? What a shambles.

report this

Mark C Digby

Jan 29, 2014 at 21:16

DIY Superb comment, sums up my feelings perfectly!

report this

Mark R - IFA

Jan 30, 2014 at 09:05

Good little summary and I agree completely. Having worked for 3 major wraps and platforms, including one of the big 2 mentioned and been in the industry for several years it still took me some time to get my head around all the new charges and I am still unsure how it will affect my portfolio!? So what chance has Mr Jo Bloggs investor got!?....but then I guesss thats the point....smoke and mirrors!

If there is one thing RDR should have looked to clamp down on its this kind of hidden, insidious, oblique charging to non advised retail cleints. All fund managers should charge the same regardless of platform/channel (within reason) and then the platform charges for their service only...prefereably with a fixed £ fee - then everyone can compare like for like - and knows who is being paid what - end of story.

Lets move from 'Super clean' to 'Super clear' :-)

report this

Clive B

Jan 30, 2014 at 09:31

@ Mark R - IFA

I disagree with "All fund managers should charge the same regardless of platform/channel" , as it would remove incentive from fund managers that could lower their charges to do so (and gain a competitive advantage)

I find the whole RDR charges thing interesting. On the one hand, I'm in favour of knowing what the charges are, but on the other I can't see why people get so worked up about tiny percentages. OK, so it's money we'll all rather have in our pocket, but I spend my time timing to concentrate on total returns after charges, trying to find an extra 5%+ at acceptable risk rather than worrying about the odd 0.1%.

(Bit like when I go on holiday. I spend £big to get there, then get upset when I buy -say - an overpriced cup of coffee. The overcharging annoys me. I need to remember the cost of the coffee is £tiny compared to the cost of the holiday which was £big)

report this

Mark R - IFA

Jan 30, 2014 at 09:59

@ Clive B

My apologies I didnt make that clear at all! What I meant was that A fund manager should have the same charge regardless of channel - i.e Jupiter incomes charge should be the same if you buy it from HL or from Fidelity. It shouldn't be cheaper (cleaner?!) on one platform just because they have the financial muscle to bully the fund manager into mate rates. Fund managers should of course all have diff charges between them so there is competitive pressure which will get costs down.

i agree compeltely on the holiday analogy as well and am very guilty of paying a lot of money for flight etc and then moaning about the cost of my Americano when I land....very silly!

report this


Jan 30, 2014 at 12:05

What's needed is for someone (anyone) to produce a table/spreadsheet with the names of all the platforms on the top and all the charges on the side(platform fees, trading fees, exit fees, SIPP fees etc). So far noone seems to have tried.

report this

Mark R - IFA

Jan 30, 2014 at 13:42

Try the Lang Cat website - he does a pretty good job of this. Just tricky comparing platforms that all charge for differnt things in differenct ways and depending on how often a trades, value of portfolio etc etc

report this

William Ward

Jan 30, 2014 at 14:05

Fully agree with DIY's comments. I've posted my dissatisfaction with HL new 'scheme' on another thread here on CW. Its a dog's breakfast. I have taken the opportunity to exit from all the ITs I had with HL (it was time to take profits or reduce risk anyway). I will continue to de-risk my portfolios (2x ISA, 2 SiPPs, 1 child SIPP and 2 x (dis)Advantage fund and share a/cs). Over the next couple of week it will become clearer (hopefully) as to where one can get better deals. My intention isn't to bin HL completely - just don't want all my eggs in their basket anymore. Equally I don't relish having multiple locations simply to carpetbag the best deal for each asset sub-class - hence some compromise on my part will be necessary.

The law of unintended consequences really has come into play off the back of the RDR/ FCA edicts. Whilst enforcing this new transparent pricing regime (good) across the private investing arena I cannot believe that this complex dogs dinner of a response by the retail investment industry was ever intended or foreseen.

report this


Jan 30, 2014 at 17:08

DIY: Totally agree. I really wish that things weren't so complicated now. I already had my shares/ITs with a different broker due to HL's higher trading charges and poor/expensive DRIP. Now I'm looking to keep my shares/ITs with one place, SIPP with HL, some of my ISA with HL, some with someone else. All my taxable OEIC/UTs are gradually being sold and moved elsewhere. William Ward mentions the law of unintended consequences; every year I review my mutual funds to reduce my future CGT liability. While looking around for alternative funds, I've also gone looking for alternative fund platforms. I've always been happy with HL but their new pricing structure seems, like Mark R said, to be smoke and mirrors. It makes them seem dishonest and underhand.

I partly agree with Clive B regarding the fuss about 0.1% here and there, but it all depends on the size of your portfolio. A £100k portfolio will retain £100 extra per year with a 0.1% saving. Compound that up over 10+ years and it adds up.

report this


Jan 31, 2014 at 04:38

All too reminiscent of the confusing "deals" offered by domestic energy suppliers.

report this

William Ward

Jan 31, 2014 at 08:17


"All too reminiscent of the confusing "deals" offered by domestic energy suppliers."

Couldn't agree more

report this

Ed the 5th

Feb 01, 2014 at 14:20

I am considering switching an actively-managed ISA fund, which I bought thru a discount broker to avoid the initial charges. It is kept, with several other ISA funds bought via the same broker, on Platform 'A' - as a 'bundled' ISA.

The new fund is a tracker. The provider has its own platform 'B', with no initial charge & significantly lower on-going charges.

(I also have a few other ISAs on Platform 'B')

Would I be stuck with paying a cost (exit or on-going) to the original broker?

Would platform 'A' allow me to switch the fund to 'B' (without exit fee) & also without moving the other funds?

The obvious answer is to ask them!! However, I can only contact 'A' via the broker, which I prefer not to do.

report this


Feb 02, 2014 at 10:53

Thanks Gavin, I really appreciate your efforts to clarify what is turning out to be a very complex set of options, with the best option varying according to the types of investment held and their value, plus how often you "churn" the portfolio and the quality of advice available.

We all want a service that meets our needs at minimum cost.

What we need is an old fashioned decision tree. One that progressively eliminates individual fund supermarkets so we gradually focus on a smallish number of providers that meet these criteria to be analysed further on the basis of cost.

A bit of a tall order I know.

report this

Mr Chuffy

Feb 03, 2014 at 18:45

I'm with DIY all the way. And it get's worse - none of the commentators have picked up that fees (outside SIPPS and ISAs) are of course paid out of TAXED income, whereas before they were an expense to the fund and then some investors received rebates on the commission. This means charges for many investors have gone UP!

report this


Feb 07, 2014 at 19:23

Mr Chuffy makes a very valid point - this makes flat fee charging platforms like Interactive Investor very attractive to those with larger portfolio's.

report this


Jan 02, 2015 at 13:09

‘super clean’ and Hargreaves in the same sentence is incompatible.

Anyone still with HL, after reading comments on this and other sites, deserves what they get.

report this

Derek Woolley

Jan 02, 2015 at 15:38

Sorry - I wish I could leave a helpful comment but having read all the others I find myself even more confused than previously. I shall just have to sit back and hope someone can 'gel' all the suggestions and produce a easy to read spreadsheet

Is it possible though?

report this

Ed the 5th

Jan 02, 2015 at 16:26

iWeb looks pretty good - comparatively speaking.Any constructive comments? I'm shifting all mine to them (except for Fundsmith whose direct 1% charge is less than buying thru a platform/broker).

report this

Mr Mcdonnell

Jan 07, 2016 at 10:34

well done Gavin ,a constructive article and useful debate, I have just moved from HL, after failing to stay awake whilst reading the small print, untrustwothy!

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

More about this:

More from us


Sorry, this link is not
quite ready yet