Hargreaves Lansdown backs down on investment trust charges

PRESS RELEASE 53 (17/01/2014)

Hargreaves Lansdown doubles charges for some investors

On the 15th January Hargreaves Lansdown (HL) announced new charges on its investment platform. The changes are no doubt provoked by the new rules whereby funds can no longer pass part of their charges back to HL. But the changes will mean that the annual charges paid by some investors will double.

The reason why charges might double is that in future investment trust holdings will not be treated as being direct share investments, even though they are the same as any other listed companies. Under the previous charging structure, there was a charge based on the value of a portfolio of 0.50% irrespective of the component elements, but with a cap of £200 per annum on a SIPP. So for example someone with a SIPP portfolio valued at £100,000 would only have paid £200 per annum. But if the client has a SIPP containing a mixture of funds, investment trust and direct holdings, even though the charge is falling to 0.45% per annum in future, there will now be a separate cap of £200 for the investment trust holdings, so the overall charge could rise to £400 (see calculation below).

In addition other charges are being introduced such as £10 for exercising your rights under corporate actions –for example if you wish to take up a tender offer. Even if you just want to vote or attend an AGM, there will be a £10 charge which is very damaging to shareholder democracy and good corporate governance.

These changes are surely quite prejudicial to the interests of HL clients who hold a mix of investments as many intelligent investors do. 

HL characterises the changes as “An extra £8 million of savings for HL clients – lower fund charges and a new charging tariff” in their letter to clients. But they do not spell out that a number of clients will pay more. Their “Quick Guide to the Changes” is also a two page document of dense text that is hardly likely to be easy reading for their clients. Many will surely not understand what is going to happen.

ShareSoc advises HL clients who have mixed portfolios to contact HL to object to these changes, and if they do not back down to consider a transfer to other investment platforms. But clients need to be aware that the cost of transferring to another provider is also rising. 

Note on Past/Future Charges as they affect a SIPP

The SIPP calculations mentioned above are as follows:

If a client has a portfolio valued at £100,000 split evenly between investment trusts and direct shareholdings, then previously they would have paid:

0.50% of £100,000 annual platform fee, equal to £500 but capped at £200.

In future they will pay:

0.45% of £50,000 annual platform fee for investment trusts, equal to £225, but capped at £200.

0.45% of £50,000 annual platform fee for direct holdings, equal to £225, but capped at £200.

That gives a new total of £400, plus additional charges for exercising corporate actions, so the overall cost to clients will more than double – from £200, to £400 plus other charges.

For further information, please contact:

Roger W. Lawson,

Chairman, ShareSoc

Telephone: 020-8467-2686 

Or; Stan Grierson, ShareSoc

Telephone 01628-522514

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