Hargreaves Lansdown has this year landed up to £2.5bn from asset managers shedding savings as Baillie Gifford becomes the latest to hand over retail accounts to the platform giant.
Baillie Gifford announced on Tuesday it would transfer more than 21,000 plan holders in its investment trust savings scheme, including its Isa, share plan and children’s savings plan, to the platform giant.
The transfer amounts to £1.3bn worth of business, adding to the £420m Hargreaves landed from Witan in January and the £765m it landed from JP Morgan Asset Management this month.
FCA prompts asset managers to assess savings schemes
If all account holders accept the default switch suggested by their asset manager, Hargreaves stands to land a £2.5bn windfall from the transfers.
Lang Cat director Mike Barrett said the pick up in asset managers transferring savings could be due to the Financial Conduct Authority’s ‘value for money’ assessments, which kick in at the end of Q3 2019. The requirements, first outlined in the asset management market study, mean fund firms must sign off that investors are getting value for money, including that they are in the correct share class for open-ended funds.
Although Barrett said he did not know the rationale behind the transfers from Baillie Gifford, JPMAM or Witan, he said many asset managers would look at their in-house schemes and decide platforms were better value for money for their clients.
Baillie Gifford director of retail marketing and distribution James Budden (pictured) told Portfolio Adviser the pick up in savings schemes transfers from different asset managers was likely coincidental. He said it was part of a trend that had been ongoing for several years.
Regarding value for money, Budden said Baillie Gifford’s in-house savings plan was free and came with free dealing “so it was a good deal for investors”. Isa investors faced an annual charge of £32.50 plus VAT. The current charging level of the accounts will remain in place for a period of three years from the transition date.
The savings scheme closed to new business at the start of the new tax year on 6 April, although existing investors can continue to add to their plans.
In a press release announcing the transfer, Budden had said the firm decided plan holders were better served by a specialist due to the “increasing variety, capability and cost effectiveness” of the platform industry.
‘One of the largest supporters of investment trusts’
Baillie Gifford selected Hargreaves for its transfer due to its ability to offer access to its entire investment trust range through a broad selection of savings products, among other reasons, Budden said in the release.
Hargreaves chief executive Chris Hill described the platform as “one of the largest supporters of investment trusts”. That description comes despite the fact the platform refused to introduce closed-ended funds to the Wealth 50 when it revamped the buy list in January.
While Hargreaves often gets accused of being one of the most expensive platforms, Barrett said many asset managers transferring schemes have investors in expensive legacy share classes charging up to 150 basis points. “It harks back to the days when people would clip the coupon out of the Telegraph and post in the application form to the asset manager.”
In the case of Baillie Gifford and Witan, Hargreaves is landing investment trust assets, where it is one of the most cost-effective D2C platforms, according to Lang Cat analysis done for the Association of Investment Companies.
