Broker price war: Fidelity undercuts Hargreaves with 0.35% platform charge
The group’s personal investing platform – which already has around 300,000 clients – today moved to challenge Hargreaves’ supremacy in the direct to consumer investment platform space with its new pricing.
All investment brokers and platforms will have to ‘unbundle’ their prices from April under new regulator rules, meaning customers will pay a ‘service fee’ to the platform as well as an annual fee on any funds held, rather than pay one ‘bundled’ charge.
As well as charging 0.35% for clients with up to £250,000, Fidelity will charge 0.2% on all investments between £250,000 and £1m.
There will be no service fees on investments above £1m. Customers will only pay the annual management charge (AMC) levied by the fund manager.
It has left share dealing costs on its ShareNetwork platform untouched, at £9.
In the all-important fund space, Fidelity said it has secured some active funds for as little as 0.2%.
The average price for a fund on Fidelity’s Select List, of approximately 140 funds selected by its investment professionals, is 0.64%, which includes trackers.
Unlike Hargreaves, Fidelity has also opted not to include any additional charges for phone or paper dealing, or for exiting the platform.
If customers want to leave their existing platform, Fidelity will reimburse exit fees levied by the other company up to £500.
It comes after Hargreaves Lansdown last week unveiled its own new pricing structure, introducing a fee of 0.45% for clients with assets up to £250,000.
For higher net worth clients the fee is lower, but the country’s largest do-it-yourself platform came in for criticism from users who were angry at some of the additional charges.
These include new charges for holding shares, transferring stock across accounts, or closing accounts.
Mark Till, head of personal investing, said: “We are extremely excited to be announcing our new pricing which offers a much simpler way to invest, providing access to the high-quality products and services we provide to our customers at exceptionally good value.
“An investor who invests £10,000 in an ISA, choosing funds from the Select List, will now pay on average £99 a year, with no additional charges whether they want to phone us, receive a paper statement or switch their funds every day. This represents a significant saving for our investors, who would have paid £175 previously.
“By being part of Fidelity, with its 1.2 million customers in the UK, we have been able to deliver an overall cost of buying investments that really meets the needs of our customers – extremely competitive and simple, making it easy to understand the total cost of investing.”
Why are platforms changing their pricing?
From April 2014, the people you buy your funds from – brokers and platforms – will have to offer commission-free or ‘clean’ funds.
Clean funds are exactly the same as traditional funds except they do not include any commission for intermediaries, or any fees to pay platforms, only the fees from the fund manager.
In the past, advisers, brokers and platforms would be paid an annual ‘trail’ commission by the fund manager group every year for as long as the investment was held.
The end investor ended up having to pay the trail commission as it was included in the overall annual management charge (AMC).
However, now the regulator has grown concerned that commissions could influence intermediaries’ recommendations to clients, it has taken action.
A shake-up to the financial services industry last year under the Retail Distribution Review (RDR) saw trail commission banned so from April all new money going into funds via brokers and platforms will have to go into clean funds.
Legacy money or money already in funds will have to be transferred into clean funds by April 2016.
Fund groups have been launching clean share classes for funds in preparation of the rule change with typical AMCs of 0.75% compared to 1.5% previously.
DIY investment platforms such as Charles Stanley Direct, Interactive Investor, Hargreaves Lansdown and AXA have already revealed their new fee structures.