Hargreaves Lansdown will cut its account charges by 10 basis points, from 0.45% to 0.35%, marking the company’s first fee change since 2014, and at a cost of “tens of millions of pounds” to the business.
The new lower ongoing charges, which will come into place from 1 March this year, are applicable on SIPP accounts and Stocks and Shares ISAs. Elsewhere, account charges for holding funds have been cut by 10 basis points to 0.35%
Buying and selling shares on the platform will now cost users £6.95 per trade, a 41% reduction from the previous £11.95 charge. However, a charge of £1.95 per trade for buying or selling funds online has been introduced.
From March, clients will be charged 0.35% to hold shares, including investment trusts, ETFs and bonds. This will be capped at £150 per year for each account.
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While this is a 10 basis point reduction in the current annual charge of 0.45%, the cap for ISAs will more than triple from £45 per annum to £150. The current cap for SIPPs stands at £200 per year.
Clients paying into their portfolios via direct debit, or who automatically reinvest their dividends, will still trade for free.
According to HL, this fee overhaul will cost the business “tens of millions of pounds”.
Richard Flint, interim CEO, said the changes will see the platform giant “become even greater value for [their] clients and make investing even simpler and more accessible.
“This investment in value comes alongside a number of other recent investments, including an upgraded app, new product offerings and partnerships to being even greater experience and range of choice to our clients.”
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He added: “We remain focused on helping clients achieve their goals, and we look forward to continuing to invest in our technology, our people, and our services in the years ahead as we keep raising standards across our platform.”
Eight in 10 existing customers set to benefit, but could increase costs for trust investors
Following the overhaul, investment research and publishing house Boring Money analysed different client profiles to see how it will impact HL’s customers.
It found that, for customers who choose to buy and hold funds, fees will fall to be broadly in line with peers, although AJ Bell and Barclays will remain cheaper.
CEO Holly Mackay said HL’s charge reductions will “really set the cost cat among the pigeons with particular implications for many robo-advisers who now look comparatively expensive.
“It’s broadly pretty good news for Hargreaves customers – around eight in 10 existing customers will be better off as the main administration fee falls from the too-expensive 0.45% to a more palatable 0.35%.”
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She added: “The all-in costs make them a cheaper ready-made pension play than Vanguard, most robos and key rivals AJ Bell, although interactive investor still marginally pip them on costs once accounts start rising above £100,000.”
However, Boring Money found customers holding a mixture of funds and individual stocks might pay more than before, if their portfolios are worth in excess of £100,000. This is due to the capped admin fee for holding shares rising from £45 to £150 per annum. This would also be applicable to investors holding a portfolio of trusts or ETFs.
That being said, HL’s ready-made pensions will become some of the cheapest in the market, its research confirmed.
