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Hargreaves Lansdown reveals new charging structure

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15/01/2014
Fund supermarket Hargreaves Lansdown has unveiled its new "clean" charging structure for its Vantage platform.

Hargreaves, the UK’s biggest fund broker, said lower fund charges would save its clients £8m a year in total.

As of 1 March, the new pricing model will see Hargreaves charge annual fees of 0.45% for investments of up to £250,000. That will fall to 0.25% pa for investments of between £250k-£1m, and 0.1% for investments over £1m.

Investments over £2m will have no charge.

In addition, the platform said its Wealth 150 funds will have an average AMC of 0.65%. The firm said this compares to an estimated 0.76% for the same funds from other brokers for retail investors.

Hargreaves also said it had struck “super low cost” deals with 27 funds. The funds on this list – known as the Wealth 150+ range – will have an average AMC of 0.54%, compared to 0.70% for the same funds elsewhere.

Deals have also been struck with BlackRock and Legal and General to provide exclusive access for Hargreaves Lansdown clients to super low cost passive funds with AMCs from 0.06%.

The platform’s CEO, Ian Gorham, said: “We are pleased to announce that we have negotiated new lower cost funds for our clients; changed our pricing structure to the benefit of the majority of our clients and further improved the already excellent service that we provide.”

Examples of funds with lower AMCs include Artemis Strategic Assets, which will have an AMC of 0.66% (vs 0.75% standard unbundled charge), and Invesco Perpetual’s Tactical Bond fund, which will have an AMC of 0.45% (vs 0.625% standard).

The Marlborough Multi-Cap Income fund, meanwhile, will have an AMC of 0.6%, down from a standard 0.75%.

However, the full list of funds will not be revealed until 1 March, Gorham said today.

“We have always sought to share our success with clients by continually reinvesting in our service through new technology, more staff, better information on a wider range of investments, or – as we have done here – in lower charges. We are now reducing the cost of investing, delivering the best funds at the best prices and saving our clients an extra £8m a year. As a result, most clients will be paying even less overall when investing through Hargreaves Lansdown,” Gorham added.

Why is the pricing structure changing?

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 and now the country’s largest broker, Hargreaves Lansdown, have also been revealing their new fee structures.

Find out how Hargreaves’ new pricing stacks up against its rivals here.

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