Hargreaves Lansdown is launching a single fund investment proposition as it look to target first-time investors.
The new service, called Simply Invest, will initially only offer the Legal and General UK Index fund, which tracks the performance of the FTSE All Share.
However, Hargreaves says new investors can opt for other funds too when they feel confident enough.
The L&G fund is discounted to 0.04 per cent, down from its headline
0.1 per cent charge. Hargreaves charges a maximum of 0.45 per cent as a platform fee.
Existing investors that hold the L&G fund through Hargreaves will also see their charge fall to 0.04 per cent from the current 0.06 per cent discount offered to the platform.
The service will offer a year of tutorial emails to help investors build market knowledge and understand financial terms, get updates on the main indexes and learn how to build a portfolio.
Hargreaves Lansdown head of communications Danny Cox says: “The need to invest for the future has never been greater for younger generations now that final salary schemes are a thing of the past, inflation has returned to the fray, and cash is still yielding next to nothing. Many younger people recognise the need to invest, they just don’t know how best to go about it.”
Finalytiq founder Abraham Okusanya says the new service is “a step in the right direction” but costs are not low enough to revolutionise the market.
He says: “It appears the total cost to the client will be under 0.50 per cent per year. While this is good, it’s not mind-blowing. There are robo-advice offerings already priced at that level.”
Vanguard’s direct to consumer platform launched last year in the UK with platform charges at 0.15 per cent, with the total cost of investing at 0.23 per cent for the lowest cost fund range.
Cox says for first-time investors it “makes sense” to start with the
domestic market, which also has an element of international diversification in its companies.
But Gbi2 managing director Graham Bentley argues investing in a global equity tracker would be a better way to access the market for first timers.
Bentley believes the most interesting element of the new service at the Bristol-based broker is the use of educational content.
Bentley says: “A number of providers have attempted to do this but relatively unsuccessfully. Education done well should help savers become more confident investors.”
Other experts have questioned the use of a single fund portfolio as a valid option for young investors.
EQ investor technical director Jeannie Boyle suggests anything that encourages people to invest is a good step forward, but she has concerns over a ‘one-size-fits-all’ approach, which ignores clients’ personal needs.
Okusanya adds: “I am not sure about the idea of a single fund. I am not sure that people who are investing for the first time, without the support of an adviser, would feel quite comfortable holding 100 per cent equity.”
Looking at the launch strategically, Liberum equity analyst Justin Bates says Simply Invest could be a direct response from Hargreaves to Vanguard entering the direct-to-consumer space last May.
Bates explains: “This looks like a logical next step [for Hargreaves] and arguably the cost and simplicity is something that could be seen as being a positive response to the threat from the likes of Vanguard.
“Hargreaves has always spoken about capturing investors early in their life cycle and again, this launch appears to address that strategy.”
Hargreaves’ robo-style investment service is the latest innovation in the digital wealth management space as other direct-to-consumer offerings begin expanding their offerings.
Robo-adviser Moneyfarm added a Sipp wrapper to its service last week, and the likes of Vanguard are also eyeing up low-cost pension wrappers for self-directed clients.
In conjunction with its direct services, Hargreaves is also looking to grow the number of regulated financial advisers it employs. At present,
it has around 100 on its books.
Hargreaves has around a 38 per cent share of the platform market already, according to Platforum.