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Hargreaves’ advice arm goes restricted

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Hargreaves Lansdown is moving to a restricted model and scrapping the minimum asset requirement for its advice service.

The move means the advisory arm of the company will no longer have to advise on products that it says are “overly complicated, opaque, expensive or carry excessive investor risk”.

Hargreaves says: “We believe that by restricting the advisory service we offer, and focusing all our advisory research and resources on the areas that actually matter to our clients, we will be able to improve the advisory services we offer, simplify our fee tariff and remove the minimum portfolio size for advice.”

From 1 October, the firm will scrap its £20,000 minimum portfolio size and advise clients over the telephone regardless of the size of the portfolio, subject a minimum fee of £495.

For investment advice investors will pay 1 per cent on the first £1m assets, compared to an uncapped 1 per cent previously.

The review service will charge between 0.365 per cent and 0.5 per cent depending on the type of service selected, where before it was weighted by assets.

For the portfolio management service the firm will remove the annual 0.75 per cent discretionary charge applied on third-party funds.

Ongoing charges will also change. For the first £250,000 the charge will change from 0.45 per cent to 0.51 per cent per annum, while for assets between £250,000 and £1m, the fees will go from from 0.25 per cent to 0.30 per cent per annum, while the current 0.10 per cent fees for assets between £1m and £2m will be removed.

Hargreaves Lansdown head of communications Danny Cox says: “This change will set the groundwork for us to simplify and reduce our advisory charges, develop our telephone-based service and increase the use of technology to improve the efficiency of the advice process.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. I think it is a sensible move to focus on what can be delivered in terms of value and service, whilst being economically viable. At the lower end however, someone with 5k to invest would pay nearly 10% of the investment because of the minimum fee of £495, this is still a problem for all of us, we cannot deal with small clients profitably as things stand.

    In the end consumers will decide what they want to pay for advice, all we can do is tell them what it costs and what they get for their money. To quote Warren Buffett ” price is what you pay, value is what you get”. I actually use the Vantage SIPP personally, it probably costs more than some other platforms, but I like what I get.

  2. What a great pity. HL is now joining the ‘Tesco’ advisers. Pile it high and sell it cheap.

    They may yet regret going downmarket as this is the segment that potentially has the greatest risk.

  3. A minimum of £495 is a lot to pay for a telephone-based service, but such is the overall cost of delivering advice, so one cannot blame HL for this. I am not sure whom it will capture in the lower-end of the market or if HL are really looking in that area, but it is hard to argue that commission on certain products wasn’t the solution.

    For those that need advice without a product solution, well then it is probably very expensive!

  4. This is simply a result of the silly definition of what ‘independent’ means. HL has clearly decided that it can no longer afford to pretend that it is going to research all products on the market because this is a stupid and pointless thing to do.

    They have to take this stand because they are big and will be noticed by the FCA. Most small firms are independent under the old English language definition but not under the FCA’s unnecessary complex one. However, with the FCA’s general high level of incompetence and the fact that they openly state that they have no record of who is independent and who is restricted, most advisers are on pretty safe ground.

  5. I have a respect for HL as a firm, they kind of did their own thing (innovated) and never really followed the herd !

    Shame really, they are stepping in line,……… makes you think if this is free will, or exterior forces dictating the direction that must be followed ?

  6. Should be interesting to see the bloggs on here today and beyond. When it boils down to it, they in business to make a profit, end of because thats what businesses are actually there to do. There will be those who slate them for doing it and those who support the decision as usual but they have made a business decision and as they say, most clients will see little difference in what HL do for them. It will be the clients who decide whether or not to stay and when the vast majority of them see in reality that there is no difference I think the client retention will be very good.
    I do agree with Sasha’s comments about the “silly” definition for IFA that the procrastinators at the FSA as it was came up with in the first place that has caused so much confusion. Given their definition, what I don’t understand is their surprise of the confusion it has created with the public. What else did they expect? Still I guess its another thing they can add to the ever growing list of c*ck-ups it is responsible (but unapologetic) for.
    As the young ones these days may say #couldntmakeitup

  7. I have tried to reach out to HL on many occasions with the answers to tackling the mass market. They won’t even return or acknowledge my emails or phone calls. I even have technology and know how which will revolutionise advice distribution and if they got their hands on it they could clean up.

    Watching some videos on Peter Hargreaves its clear where this culture comes from.

    I have been always open and if someone reaches out I will give them a chance and listen to what they have to say

    Charging nearly £500 on anything shows they haven’t thought this though but like most companies they don’t put the consumer first and think what’s best for them.

    The model of charging on going percentages is wrong if you don’t offer anything in return or of value.

    HL makes so much money from this model they should offer the advice for free.

    But then again the industry doesn’t think like that does it.

  8. This is very interesting “Hargreaves advice arm goes restricted” and ”We shall continue to offer the same broad range of investment advice, including portfolio management, investment and pension advice, retirement planning and inheritance tax mitigation as we do now.” So does this mean they weren’t truly independent before, if the change wont make any difference.

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