If you think Hargreaves Lansdown is too expensive, threaten to leave

Hargreaves Lansdown wants to have its cake and eat it.

It wants to carry on charging more than most of its rivals. But it doesn’t want to lose its wealthier customers.

So, it’s adopting the mobile phone companies’ favourite tactic. If you threaten to join a rival phone network, you may be offered a new special deal with lower prices.

A report on the MoneyMarketing website cites “anecdotal reports” from customers which suggest that Hargreaves is willing to negotiate on fees or cap the cost of holding assets.

Interestingly, a Hargreaves spokesperson admitted to MoneyMarketing that it may make “exceptional arrangements” for some clients.

The spokesperson said: “Our pricing tariff is clearly stated and is designed to be fair, competitive and sustainable. It is not our standard approach to have individual arrangements – with 577,000 clients this would simply be unworkable.”

So, it sounds like Hargreaves is prepared to offer discounts to some richer clients who threaten to leave, but probably not to everyone across the board.

I’m pleased that at least some Hargreaves customers will get better deals, but I’d be much happier if Hargreaves cut its prices for everyone.

Under its new pricing structure, most investors will be charged an 0.45% annual platform fee on your invested assets (funds, shares, investment trusts, and venture capital trusts (VCTs)). There’s a £45 charges cap for any shares or investment trusts you hold in an Isa, and a similar £200 cap for Sipps.

By contrast, Fidelity and rplan are both charging 0.35% a year, while Cavendish Online and Charles Stanley are even cheaper at 0.25% a year.

When it comes to share dealing, Hargreaves is more competitive, but it’s not the cheapest broker. The standard share dealing charge at Hargreaves is £11.95 per trade, with a £5.95 rate for frequent traders.

At AJ Bell Youinvest, the standard dealing charge is £9.95, while the frequent trader rate is £4.95.

The plain truth is that Hargreaves could easily cut its fees if it wished. In its latest results, the platform provider revealed that its operating margin was 65%. No doubt that margin delights many Hargreaves Lansdown shareholders, but as a customer, I’m far from impressed.

I’m tempted to move my money to a different platform, but so far I’ve stayed with Hargreaves, because I like the firm’s website and its excellent customer service.

Perhaps I should get on the phone and threaten to leave.

  • The Armadillo

    As far as I remember, Fidelity’s fee isn’t capped until £1,000,000 (although it does reduce to 0.2% at £250,000 so if you have more than £13,000 in ISAs you’re actually better off at Hargreaves Lansdowne. You simply need more than £18,000 in ISAs for it to beat Charles Stanley’s rate if that’s uncapped or capped any higher than that too. I assume Hargreaves Lansdowne is trying to appeal to people with holdings above that size. Or am I missing something?

    • Mr IRR

      Armadillo, I agree that I must be missing the point. Moving because of a £10 difference in charges is pointless. Frankly if you have less than £10k in your ISA (which is when you hit the HL fee cap) you shouldn’t be bothering with share/fund investments (the 0.45% fee plus dealing charges take a bigger chunk of your gross returns). Unless, of course, you’re in the first year “ramp up” stage of your portfolio in which case you should consider the “excessive” charges as a set up cost towards future tax free gains. You don’t get nothing for nothing!

      • nadail

        You are missing that the fee cap is per account (ISA, SIPP and drawdown SIPP that’s three accounts). And the cap doesn’t apply to funds, only shares/ITs/ETFs and it is £45 in an ISA and £200 in a SIPP. And the cap doesn’t apply to their extras either.
        It all adds up to much more than a £10 difference.

  • Quant

    I suggest moving your account to Charles Stanley Direct, far cheaper and top quality service! (I should disclose that I am a shareholder 😉 )

  • Tom Finney

    I would not move from Hargreaves Lansdown because of cost.

    Surely it is better to have a profitable company with a solid balance sheet looking after ones money.

    I remember some years ago that Equitable Life sold pensions on the premiss that there costs were less than other providers and look what happened to them.

  • DaveH

    My wife and I have £200k+ invested with H-L. They will not reduce fees, but will not charge exit fees if I want to move. They have asked me to wait till after March 1st. Shall I call their bluff and move?

  • Accumul8

    Tom, Equitable’s downfall was not being cheap – it was a strategic mistake in offering guaranteed annuities when interest rates fell to historic lows. I agree that you want a broker/platform who is financially stable and profitable but that does not mean that they need to make 65% profit margins – HL could cut fees from 0.45% to 0.16% and still be profitable.

    There are many profitable online stockbrokers who survive on commissions but charge nothing for holding assets (or when they do it is a flat fee such as £50 pa). After all, there is not a lot of cost involved in simply holding assets in custody and that cost does not really increase just because a higher value is held. The problem with the HL model (and others such as Fidelity) is that they have grown fat receiving trail commissions and therefore their psyche is to charge a %age of value rather than charging based on actions involved (as stockbrokers have had to).

    I would suggest trying a platform that has grown up from stockbroker roots such as Charles Stanley or possibly even better AJ Bell who charge nothing for shares, ETFs and ITs and only 0.2% for funds but capped at £200 across all accounts. For a £200k portfolio with a mix of shares and funds in an ISA and investment account the annual charge would reduce from say £700 (depending on the mix) to £200 – a saving of £500. Admittedly, AJ Bell make a dealing charge on funds of £4.95 but you could deal 100 times a year for the saving made and they are cheaper than HL for share dealing plus they do not charge for corporate actions.

    With HL, long term investors who only deal online are subsidising short term traders and those who deal by telephone. In summary, if you deal frequently in funds and deal by telephone, then stick with HL, otherwise whatever the size of your portfolio, you should seriously consider switching. In an era of low returns, an extra 0.45% pa is a heavy drag on performance.

  • 4caster

    I have about £155,000 in an Alliance Trust Savings (ATS) ISA, mainly equities. I also have £57,000 in a Hargreaves-Lansdown (H-L) ISA, mainly certain funds in which ATS will not deal. ATS charge a fixed fee of £22.50 per Quarter including VAT, equivalent to 0.06% per year, whilst H-L charge 0.45% a year, or 7.5 times as much. On the face of it I should transfer the H-L investments to ATS, but that would mean selling the funds that ATS will not handle.

  • nadail

    Hargreaves just charged me £90 to calculate what my puny drawdown SIPP can pay out each year. Apparently, government rules, they have to do this every 3 years, and every year after age 75, and every time you move extra funds into drawdown. How they can justify charging so much to do it I don’t know – and there was no warning, just something buried deep in the Ts & Cs. So I’ll have to move my SIPPs and probably my ISA at the same time. I like Fidelity’s promise of ‘no additional charges’. Do any cheaper platforms have a similar promise I wonder?

  • robbie84

    HL have one of the lower charges for GAD. II charge £150, and also charge annual payment fee. In drawdown the charges from different companies are such that you have to work out very carefully whether or not to move.