Hargreaves Sparks Platform Price War

Financial regulation and pressure from the Government to push down the cost of investing and has meant many fund platforms are reviewing their pricing structure

Emma Wall 15 January, 2014 | 3:52PM
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Investment platforms are vying for consumers’ business – initiating investment savings to draw in new money. Hargreaves Lansdown, Britain’s largest retail investor platform, has today announced it is slashing the cost of investing in funds for hundreds of thousands of investors from March 1. This news was quickly followed by an announcement from Fidelity Fundsnetwork who said they will be revealing a new pricing model on January 22.

We are focussed on providing a comprehensive range of competitively priced funds

Pressure from the Government to push down the cost of investing, and City regulation entitled Retail Distribution II, has meant many fund platforms are reviewing their pricing structure. 

Hargreaves largest discounts are on a number of core funds that exhibit best performance and best price they are calling the Wealth 150+ funds. This list currently totals 27 funds, the names of which will be confirmed on March 1.

Mark Till, Head of Personal Investing at Fidelity Worldwide Investment said that he was anticipating the release of these names.

“Hargreaves are reporting that they have secured some good deals for 27 of the 2,000 funds on their platform. It will be interesting to see what funds they have selected,” he said. 

“Fidelity believes that investors are best served by being offered access to great value across all the funds that a platform provides not just a select few. We have therefore remained focussed on providing a comprehensive range of competitively priced funds, and will use our skill as a leading investment house to help investors pick the best performing funds, without any limitation.”

At the Hargreaves press conference this morning, head of research Mark Dampier said that he expected the Wealth 150+ to grow as more asset managers adjusted their pricing structure.

“The majority of asset managers have the same direction – to drive down charges,” he said. “I expect the Wealth 150+ to grow as the cost of investing falls. Thirty years ago you paid 6% in initial charges on a fund, volumes and efficiencies mean investing costs less now.”

Hargreaves expects its new pricing structure of 0.45% a year for most portfolios to mean 80% of clients save money. There will be some additional charges for customers – such as paper statement charges – which Fidelity directly addressed.

“We would suggest that investors focus on the overall cost of investing; including the fund charge, the account fee and also all of the other fees they may be charged. 
We believe that when we share our simple pricing model next week, it will be clear that we provide a lower overall cost of investing for the majority of investors, particularly those  wanting to choose funds from across the whole of the market,” said Till.

“We believe that all pricing models should be simple for customers to understand and should not have lots of additional charges. Therefore we can announce that we will not be charging our customers additional fees, such as fees for paper statements or exit fees, in line with our ‘Magnificent 7’ pricing model guide.”

Gina Miller founder of consumer group The True and Fair Campaign said that while welcomed Hargreaves’ restructuring she said that more could be done to provide investors with total transparency.

Miller called for the industry to introduce a Total Cost of Investing measure which clearly spelt out the cost of investing in pounds and pence to allow allows genuine comparisons between fund managers and platforms.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Emma Wall  is former Senior International Editor for Morningstar