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Hargreaves and Charles Stanley defend pre-filled fund choices

Direct to consumer platforms have defended the use of pre-filled fund choices in application forms sent to prospective clients. 

Hargreaves Lansdown pre-populates fund selections in Isa and Sipp application forms when sent with its monthly magazine. It says the funds vary and reflect the topics discussed in its magazine.

The pre-filled funds most recently included were: HL Multi-manager Income and Growth; Standard Life Investments UK Smaller Companies; and GLG Japan CoreAlpha.

Investors can choose alternative funds and do not have to invest in any of the pre-filled choices.

Platforms including Fidelity Personal Investing, Alliance Trust Savings, The Share Centre and Interactive Investor say they do not pre-populate investment choices.

Charles Stanley Direct says it also pre-fills fund choices to reflect topics discussed in its magazine.

Satis Asset Management chartered financial planner David Hearne says: “Hargreaves Lansdown, particularly through its website, provide excellent information to retail investors. 

However, in their efforts to make the application process easier for clients they risk crossing the line from informing to advising.

“Despite the standard regulatory statements it is hard to imagine a retail client would not feel they had been advised if the investments are described as exceptional and their application form has already been pre-filled.”

Hargreaves Lansdown head of financial planning Danny Cox says: “Hargreaves Lansdown are specialists at making investments easier for clients and helping people make the most of their money
and this is part of a much longer process.”

Charles Stanley Direct head of investment research Ben Yearsley says: “You want to make things as easy as possible for clients but you want to ensure at the same time you are not limiting their choices.” 

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 11th July 2014 at 9:54 am

    You can even do Income DrawDown on a non-advised basis via HL. The suitability reports on Income DrawDown that authorised advisers have to produce are enormous, and probably risk a complaint that, at a later date, the FOS will uphold on the basis of the client claiming that it was all so involved that, as an inexperienced and cautious investor, I just didn’t understand what Mr X told me was the right thing to do. I trusted him, he gave me wrong advice and now I’ve lost 25% of my pension fund. It’s already happening. How HL manage to get round all that I just don’t know.

  2. Quite Julian – ‘advice’ by the back door and an FOS adjudged complaint some time down the road methinks… The regulator may have a take on this too – when are generally distributed brochure promotions of something ‘advice’ (both in the recommendations but also the assumed rejection of everything else) – and then the firm promoting the stuff needing to ensure it’s all appropriate for recipients and their circumstances/risk profiling, etc.

    Perhaps the market has worked out the holes in the new models and that’s why HL shares are a tad cheaper than their previous frothy levels! .

  3. Surely this breaks the execution only rules as any pre-filled application surely constitutes advice?

    After all what is stopping an adviser pre-filling an application and getting a client to sign it if the FCA do not uphold even the basic principle like this and what hope is there.

    I hope that there are lots of people that take up this offer from these companies who later complain that the funds do not match their attitude to risk!

  4. Hargreaves Lansdown is a very large organisation. It is interesting to me that their response comes from Danny Cox who is Head of Financial Planning (the regulated advice part of their business) and not from somebody representing the presumably larger, direct to consumer, part of their business. Doesn’t this just add to the potential for client confusion?

    Having just written this I thought I would check out the Hargreaves Lansdown website to see Danny’s profile. I noticed this;

    ‘Danny’s experience in helping investors with their finances is invaluable for bridging the gap between financial advice and the services we offer to help clients manage their own investments’

    Bridging the gap?

    I think direct to consumer propositions need to make the gap, and the risks to clients, more explicit.

  5. I think the advice/execution only piece is something of a red herring here. Technically it’s not advice – we can argue it should be advice (Peter) but that needs a change in the rules and we are where we are.

    What this really goes to the nub of is one of the FCAs favourite topics – ‘behavioural economics’. This means looking at how clients actually behave in the real world, understanding client drivers, how biases occur and conflicts arise. The onus is on firms to understand and mitigate these.

    By pre-filling a form, the question is what does the firm expect to achieve by this? Have they taken account of client behaviour in these circumstances and is it acceptable? We might assume that you would get a great many clients simply going along with the default and if that’s the case then have the firm taken advantage of this inertia to the detriment or potential detriment of the client?

    Have these firms even considered these issues and if so have they done it adequately? I would imagine this is a question high on the FCAs list given the high profile and likely number of clients involved. In reality we don’t know and these firms may have all of this covered…

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