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High street banks reveal RDR advice charges

Lloyds Banking Group, HSBC, Royal Bank of Scotland and Nationwide have all set out different strategies for charging for restricted investment advice.

Money Marketing research of post-RDR advice costs shows Lloyds is charging an upfront fee starting at 2.5 per cent on the first £300,000 invested, dropping to 1.5 per cent on amounts between £300,000 and £1m, and to 0.75 per cent on amounts between £1m and £2m. There is no charge on the amount invested over £2m.

Platform charges on pension products range from 0.1 per cent to 0.6 per cent per year depending on the investment amount.

HSBC is charging an upfront fee of £950 on assets up to £75,000, which moves to 1.3 per cent on assets between £75,001 and £150,000, with a maximum fee of £1,500. This drops to 1 per cent for assets between £150,001 and £500,000 with a maximum fee of £4,000, to 0.8 per cent for assets between £500,001 and £1m with a maximum fee of £6,500, and to 0.65 per cent for assets between £1m and £3m with no maximum fee. HSBC initially told Money Marketing that there was no platform charge, but has since amended this to say a platform charge will apply of 0.39 per cent a year.

RBS is charging £500 to set up a financial plan and a fee when the client invests, which starts at 1.25 per cent for assets up to £500,000, falling to 1 per cent for assets between £500,000 and £1m and 0.75 per cent for assets over £1m. Platform charges start at 0.175 per cent for assets less than £100,00 dropping to 0.11 for assets over £1m.

Nationwide is charging 3 per cent initial and 0.5 for ongoing advice. The platform charge starts at 0.65 per cent for assets up to £11,000, and drops to 0.24 per cent on assets over £20,000.

Santander has not disclosed its charging structure. The bank suspended its investment advice last month over suitability concerns.

Lloyds requires customers to have at least £100,000 to invest while HSBC requires customers to have at least £50,000. Nationwide and RBS have no minimum investment requirement.

On ongoing advice, Lloyds is providing free financial reviews where there is no new investment. The charge for new investments will take into account previous investments to offer a lower fee.

HSBC offers free reviews within 12 months of the original investment. Reviews with no new investment then cost £499 plus VAT on assets up to £500,000, and £950 plus VAT on assets over £500,000. If new investments are made within 12 months the percentage fee is worked out on the total invested over the year less any fees already paid, while if the additional investment is made after 12 months the percentage fee is worked out on the additional amount only.

RBS customers can opt for ongoing advice at outset which is charged at 0.5 per cent a year plus VAT, and is capped at £2,000. Those who have not opted for ongoing advice who want a new financial plan or want to look into a new aspect of advice would be charged another £500.

Philip J Milton & Company managing director Philip Milton says: “Advice is based on relationships, not products, and banks are not used to that environment. Clients may be more prepared to shop around and seek independent advice once they know how much advice costs from banks selling a limited product range.”

Summary of advice charges

Lloyds Banking Group:

  • Upfront charges starting at 2.5 per cent on the first £300,000 invested, dropping to 1.5 per cent on amounts between £300,000 and £1m, and to 0.75 per cent on amounts between £1m and £2m.
  • No charge on amounts invested over £2m.
  • Free financial reviews where there is no new investment.
  • Advice charges will apply where there is new investment with previous investments taken into account to offer a lower fee.

HSBC:

  • Upfront charge of £950 on assets up to £75,000. 1.3 per cent upfront charge for assets of between £75,001 and £150,000, dropping to 1 per cent for assets of between £150,001 and £500,000 are charged 1 per cent, to 0.8 per cent for assets of between £500,001 and £1m, and 0.65 per cent for assets of £1m and £3m.
  • Free reviews within 12 months of original investment.
  • After 12 months reviews with no new investment will be charged at £499 plus VAT on assets up to £500,000, and £950 plus VAT on assets over £500,000.
  • For new investments made within 12 months the percentage fee is worked out on the total invested over the year less any fees already paid, while if the additional investment is made after 12 months the percentage fee is worked out on the additional amount.

Nationwide:

  • 3 per cent initial charge regardless of investment size.
  • Ongoing 0.5 per cent adviser charge per year.

RBS:

  • £500 plan fee.
  • Implementation fee of 1.25 per cent for assets up to £500,000, falling to 1 per cent for assets between £500,000 and £1m and 0.75 per cent for assets over £1m.
  • Ongoing advice fee of 0.5 per cent plus VAT, capped at £2,000 excluding VAT.
  • £500 plan fee after six months if clients want a new plan and have not opted for ongoing advice.

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Comments

There are 41 comments at the moment, we would love to hear your opinion too.

  1. How confusing is HSBC’s charging structure?!

  2. How can Lloyds not charge anything on investments over £2m? I thought where there was advice, you had to charge?

  3. Goodbye HSBC and RBS.

  4. Well done FSA thats all nice and clear then for the consumer!

  5. For those who like their military history:

    ‘Cry havoc and let slip the dogs of war’

    What an absolute pigs ear. So much for consumer empowerment and clarity ….

  6. Seems failry clear to me. They are not getting their arm in either it would seem. I do hope it all falls flat on its face though, if only to prove what a shambles the RDR will be. LOL

  7. This should keep “which” in work for the next year.

    Why oh why do these people have to make things so complicated ? not just the FSA, tax, pensions, utilities etc etc, no wonder the man/woman on the street find it hard or damn near impossible to work them out.

    Still a good opening for another annoying merkat or opera singer to plauge our nights telly viewing, compare the bank rat .com !!!

  8. I had to read it twice to understand it. God help Joe Public when he tries to shop around.
    RDR was supposed to make everything clearer for the client. Instead what it has succeeded in doing is create different charging structures being applied by different companies. This is only going to make comparisons between those companies harder for the uninitiated.

  9. leaving the industry 10th January 2013 at 11:07 am

    What an absolute joke!
    Joe Average wins £300k on lottery/scratchcard etc and obviously needs advice on how to invest what is a life-changing amount of money — and they want him to pay £7500???
    Meanwhile Jonny Bigshot with his spare £3M to invest gets free advice???
    Those who most need advice will be put off due to the costs. A real RDR triumph!!
    Well done FSA and the banks – you are an utter disgrace!

  10. If we are honest, these are no more confusing than the different charging structures independent and restricted advisers have published, so I don’t think we can accuse the banks of that. I imagine though that fund fees would need to be added also. Here’s a table that tries to compare getting 2 years worth of on-going advice from each of the Banks mentioned with an initial £200k investment. Hopefully it will work posting it here!

    Bank Upfront 2nd Year Total 2yr Cost
    Lloyds £5,000.00 £0.00 £5,000.00
    HSBC £2,425.00 £598.80 £3,023.80
    Nationwide £6,000.00 £1,000.00 £7,000.00
    RBS £3,000.00 £1,000.00 £4,000.00
    Santander Not confirmed yet

    HSBC, whilst being the most complicated, is by far the cheapest (best value!) over 2 years. Lloyds would be the cheapest eventually as they don’t charge annually.

    It would ne interesting to hear the FSA’s views on how all this has panned out wouldn’t it?

  11. My goodness – what a load of miseries. As I have said before this is good news for IFAs. (Oh and to the Guy who didn’t understand that there was no charge at Lloyds for over £2million – they make it on the management charges – the poor sucker is probably entirely invested into SWF poorly performing unit trusts – simples)

  12. Charging 3.0% to advise customers to invest some of their money in deposit accounts? Charging 3.0% to advise someone to invest in a Stakeholder Pension? What is this RDR? What on earth is it?

  13. And of course you all, as will the clients, totally ignore the charges they will make from the vertically integrated investments they advise clients to invest in. That is where they will make all the profit !

  14. The way I read the Lloyds charges, it’s not that advice on investments over £2 million is free, it’s just that they only charge based on the first £2 million.

    i.e:

    *Someone investing exactly £2 million would be charged £15,000.

    * Someone investing £20 million would also be charged £15,000 since anything above the first £2 million doesn’t attract a charge.

  15. Isnt this what RDR is trying to get away from – suggesting that advice is free as per the Lloyds charging structure – as Harry said they are probably making the money on the investments unders management so to suggest it is free is surely contrary to FSA guidance?

  16. I really do think you have to start thinking this from the consumer and not from our petty world of financial services. After all in what other industry would you purchase goods or services and not have any idea of how much it’s going to cost.

    What you all seem to be bleating about is that you’re having to disclose to the client that you’re charging X amount for pounds for your services well I’m sorry to say that surely that’s what we should have been doing in the first place.

    I was invited on to BBC radio Suffolk recently to explain the new RDR rules and if any of you can be bothered to have a listen you might learn something as I’ve had quite a lot of positive feedback from normal consumers.

    http://www.essentialifa.com/2013/01/07/rdr-what-it-means-for-customers/

    Those advisers that concentrate on service, and putting the consumer first will succeed those that don’t will fail that’s called market forces.

  17. All this will do is demonstrate to the public that seeking IFA services for investments is probably going to be the most economical route and that by using a whole of market IFA for such services, they can be assured of fair treatment, best advice, best execution etc etc etc.
    But WE have always done that haven’t we.?

    All we need to do is get that message over to the public. Come on IFA promotions get with the program!

    We are certainly living in interesting times.

  18. @ Peter Herd. How much does your firm charge a client for advice on cash deposits as part of a portfolio? How much does your firm charge for advice on a Stakeholder product as part of a portfolio?

  19. Ned spot on!!!!!

  20. Let’s see how long it takes before a price comparison website is able to go compare cost for a simple lump sum investment across the market. Then watch the plebs stampeding for ‘cheapest is best’, regardless of fund provider, performance etc

    Is this what the FSA really wanted with RDR ?

  21. We do not charge for cash deposits

    For advice I charge £170 per hour if the client wants to work that way.

    Or

    I can charge % of investment eg 3% initial 0.5% trail.

  22. My challenge to those complaining these are complicated is for you to describe what your firm charges for different investment amounts?

  23. To the poster who said….you have to charge for advice…
    No you don’t. You probably won’t be in business for long if you don’t, but you simply have to have a published charging structure which you can give to your client up front. You could opt to charge only for ongoing advice and not any initial advice if you want.

  24. Lloyds are offering “free reviews”? Commiting to an open ended service without charge sounds dangerous to me, unless a cup of coffee and a friendly chat constitutes a “review”. It’s interesting that Lloyds have chosen to undercut their 60% owned subsidiary SJP.

  25. The vertical integration of products and advice by Banks will make most of these fees meaningless when viewed in isolation.

  26. Just had a call from a client £100,000 to invest – HSBC said charge was 1st meeting free, then 1.2% for completing full advice process, (no details on ongoing costs) but minimum £500 if advice not taken.- strange as the £500 would have to include VAT if no inter mediation, but apparently this was not mention so must be included.

  27. Martin Greenwood 10th January 2013 at 3:00 pm

    I think this is exactly what RDR was intended to do. No matter how complex, at least customers now see that they are paying for advice as opposed to being told it was free and having the back end of thier investment ripped out!

  28. Mr G

    My understanding of the VAT rules is that VAT would not be charged on the £500 if the full advice process is followed and a recommendation report is generated with a product recommendation. The fact that the client didn’t actually complete on the transaction doesn’t mean that VAT is charged.

    This is my understanding doesn’t constitute advice in connection VAT please refer to the Revenue guidelines on this subject.

  29. Bunch of sharks, this RGR think is really going to shake up the industry and about time too.
    Do they really think they can get away with those fees? I guarantee advice costs will plummet, the cash cow is no more!

  30. HSBC – I work there at the moment and believe me all the staff are as much confused as the customers will be – complex and there no leadership in HSBC. It’s all a rip-off. It’s own internal investment charge the same OCF as pre RDR and yet now the they still have to pay the one of the complex fee arrangement.

    they won’t around offering this level of fee watch this space…. HSBC is internally inadeqaute having been and worked at other banks!

  31. I agree with Ned’s comment, this is brilliant news for quality financial advisers who can deliver a better service for the same or less than these models.

    The firms that have put in the hard work in 2012 will have no problem competing with this, and certainly shouldn’t fear losing any client to a bank. It may prove to be a great leveller of the playing field.

  32. A point of clarification on LloydsTSB Private Banking charges. The bank is aimed at those that have money to invest and it’s charging structure is based on this.

    The bank has a sales team (that does the finacial advice) and a relationship management team (combined with back office fund management). The initial charge advertised is for the sales and is a replacement for their old initial funding commission of investments, so the client will not have an additional inital charge from the fund manager (SWIP) or if they do, it will be minimal. After that point there will be an annual service charge (approx 0.5% to 1%) for wealth management and relationship management that maintains the assets to the correct risk level and makes full use of ISA allowances where valid. Future reviews (normally annually) are free if you a) have taken the RM service and b) you arn’t putting any new money into the product.

    The toal impact for this is that there is not a great deal of difference (froma client point of view) to the old charging system. It is that they can now account for all charges directly attributibible to their sales team as required and show that it is not a loss leader for other parts of the business.

    Note that I used to work for LTSB, but do not currently.

  33. Some great comments – as a non-bank adviser nice to see that the banks fees actually show their massive overheads which they are passing to clients and that most of us advisers out there can undercut easily with our RDR propositions whilst providing our clients with a wider choice and probably better service. Perhaps RDR won’t be so bad after all! Wierd not calling myself independent though with regard to investments and pensions! ‘We offer products from a limited number of companies selected for their financial security, product features, charges, etc…. but can go off this list if neccessary….’ but until the FSA actually state what ‘independent’ now means best cover the bum and be sure we aren’t claiming to be something we are not!

  34. To Anonymous 11JAN 1:38

    You obviously didn’t pay attention then. I work for HSBC and understand it perfectly. Please do not speak for anyone other than yourself.

    And if you don’t like it, please leave, we don’t need unproffessional staff like yourself who can’t be bothered to pay attention and instead resort to bad-mouthing us, we get enough of that from elsewhere. Nice to see you’re so grateful for the salary.

  35. Its interesting that no one has made the point up to now that these are not “advice” charges, they are product implementation charges. This proves the point (yet again) that banks are not the place to go for advice. They have to sell product.

    Looking at some of the posts here there are IFA’s/ Restricted advisers who are in danger of doing the same as the banks and concentrating on the product and not the client. You cant slag the banks and then operate in the same way.

  36. To Ian Robinson

    Very good point

  37. i agree peter, good comment Ian

  38. Harry Katz and others please top saying simples! You are not Meetcats/Meerkatz!

    Great to see bank charges are so high, sadly as people don’t understand it though they will probably in many cases assume that the bank’s high charges are ‘standard’ and still not shop around – however for consumers with a brain they will realise the banks’ high overheads need to be met and hopefully come and see us non-bank advisers!

  39. Customers of structured products have been hit. If the adviser fee is taken out of their investment, and the plan fails to kick-out or whatever, and simply returns capital, in the past the capital returned was the full investment. Now of course it will be full investment less adviser fee. An exception should be made. Structured products should still pay by commission. Everyone knows it’s up to 3.0%. Then if it fails to kick out and its a return of investment, the client’s full investment will be returned.

  40. I still don’t understand how there can be no advice charges for Lloyds. All of the charges are for implementation, which tells the client that advice is still free.
    There are no charges at all for very large investment, so who is paying for their salaries whilst giving advice?
    Clearly profit from the fund charges is subsidising the advice and set up process. Why isn’t this ilegal?
    If it weren’t for the advice and set up process the charges would be lower so there IS a cost.

  41. Once again, the Banks continue to charge a ‘product placement fee’ and are more interested in new investments than keeping/servicing/retaining existing clients…..they had new business targets pre RDR and they will continue to have new business targets in the future. ….Glad I’m out of this environment

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