From 1 March 2014, the annual management charge will be discounted by an average of 0.11% for funds on the firm’s Wealth 150 list. Average charges for the same funds have been lowered to around 0.65%.
In the wake of rolling out RDR regulation, the FCA has said that platforms will need to implement RDR compliant measures by April 2014. Under new rules, not only are costs cut but the fee structure is becoming more transparent.
The price is right?
For the first time, investors are able to see how much money Hargreaves Lansdown keeps and how much of it goes to fund managers. Under the new pricing model, the platform keeps 0.45% while the remaining charge of 0.65% is the fee passed on to the fund manager.
The charge applies to all of the firm’s clients, accounts, existing and new fund holdings.
Most Hargreaves clients will pay less for their investments when using the company’s Vantage service. An annual charge will be taken for holding funds at this service, but on the flipside customers benefit from the competitive level of this charge when combined with reductions on the fund annual management charges.
Teething issues
While the new fee structure offers investors a better overview of their cash flow, working out the actual figures is complex and the information still may not give consumers total transparency or greater understanding on all costs and fees.
According to Gina Miller, founder of The True and Fair Campaign, RDR has so far failed to deliver clarity for consumers on the amount they are paying for investments.
“Today’s announcement from Hargreaves Lansdown demonstrates the scale of the problem. Its claim that the pricing changes will see customers saving money over-all because of discounts obtained from fund providers risks causing more confusion, not giving greater clarity,” she said.
Another potential rival of Hargeaves Lansdown, Nutmeg's CEO Nick Hungerford, pointed out that the new Vantage tariff lists no fewer than 73 lines relating to different charges. He added that the complicated criteria could be completely bewildering to the average investor and requires a detailed analysis by the most committed of analysts.
