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Hargreaves chief urges regulators to act on fund fees

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Hargreaves Lansdown chief executive Ian Gorham has urged regulators to force asset managers to pass on fewer costs to investors and be more transparent on fund charges.

Gorham, who is to depart from Hargreaves next year, says asset managers should not overcharge investors and exclude other costs from the current single fee, such the price of research, audit, legal costs and fund administration costs, the FT reports.

He says: “The way it’s set up at the moment is not as transparent as it could be.

“There should be one charge and asset managers should have to pay all the costs of running the fund out of that charge. At the moment, it’s not always the case that they do.”

Gorham says there “should be a change in the way things work.”

He says: “I think the regulator should come in and put rules down about this.”

Gorham’s comments follow the FCA’s plans to scrutinise asset managers on the way they disclose transaction costs to workplace pension schemes.

The regulator has also proposed to ban firms from accepting payments from third party firms on investment research.

This year, star fund manager Neil Woodford also stopped charging investors for research.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Shouldn’t be up to the client ? not you, or the FCA ?

    If the client wants cheap he can get cheap (or fewer cost as you put it)
    Lets face it if you, and the FCA keep squeezing the industry and in this case fund managers all you will end up with is cheaper ran funds (closet trackers) and a cheap service, at the end of the day, fund managers & firms are not suddenly going to buy their suits from Poundland and firms are not just going to start to work out of a farmers barn just out side Stoke ! (not that I have anything against Stoke) to save a few quid ! No, what will go, is funding on the very thing that makes the real difference !

    I am all for being transparent, but please stop this incessant fixation on cost labeling everything as overcharging, rip off, or expensive !

    The cost and price of a laptop,computer,fridge, microwave, or washing machine can be driven down by what we have now in a throw away world, but please ; you cant do this in financial services, just look at the monster we have made by the amount of white goods and junk that are over flowing in our landfills.

  2. Until recently all clients with Hargreaves paid the unbundled fund charge from which Hargreaves then received a large rebate that they mostly kept for themselves. Was the client informed of the rebate received or the amount being retained? Its a bit pot/kettle if you ask me.

  3. I have HL investments, they seem to go to great lengths so avoid actually telling me what I pay them in fees every year, like RDR never happened!

  4. @Rob Wood
    No – one as fierce as a convert!

  5. The whole industry’s & FCA’s paranoia about charges for this, charges for that, transparency for everything is out of control. The OEIC and ISA crap that comes to clients twice a year is so much more complicated now, in the name of transparency, than before they cannot make head nor tails of it, it’s ridiculous. FGS get a grip of yourselves

  6. HL banging on about transparent charges = Standing a glass house throwing stones.

    Despite that there is an arguement that there should be a more standardised approach to the decleration of costs. I think this is more of an issue for fund of funds or multi-managed funds than it is for other types of fund. How many times have you seen significant differences between the AMC and the OCF? Why report the AMC at all? We, as advisers, know to look for the OCF but does the public?

    I don’t think this is an arguement for driving down cost, just clarity of costs. If a fund cosistantly out performs its peers but costs twice as much I wouldn’t bat an eyelid at suggesting a client invests in it.

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