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Hargreaves challenges FSA view that fund charges will fall

Hargreaves Lansdown has questioned the FSA’s belief that management charges on funds will fall under adviser charging and the platform reforms.

In a response to the regulator’s platform consultation paper, released to the stock market today, the group, which operates the Vantage platform, says fund providers may consider cutting their fees to be “imprudent”.

HL says: “We understand the logic of [the FSA’s] expectation of a fall, whilst noting market forces are the key driver of prices rather than regulatory change.  However, we wait with interest to see if such changes will occur to the extent FSA envisage.

“For example, if the IFA population shrinks, fund managers may need to retain income to finance alternative distribution and advertising strategies. Therefore they may consider reducing charges, especially in the short term, imprudent.”

The FSA said in its platform consultation paper yesterday: “We would be surprised, given the impact on a fund manager’s performance figures, if fund [charges] were maintained at current levels. We would also be disappointed, given the confusion for consumers this would cause.”

HL also says the platform consultation paper does not pose a threat to any of its sources of income, and there are no elements of the paper that are a cause for concern.

Chief executive Ian Gorham adds: “We are satisfied with the outcome of the FSA’s platform paper. The paper contains a number of initiatives which, if properly delivered, should benefit financial services retail clients. We do not perceive any threat to the Hargreaves Lansdown model from the paper. As we already offer most of the initiatives proposed by the FSA, such as re-registration, the cost implications for Hargreaves Lansdown should be very limited.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Lunatics Running the Asylum 18th November 2010 at 11:24 am

    The FSA Lunatics are Running the Asylum and of course their approach is insane! Its time they were locked up!

    PS: Apologies to all lunatics – I didn’t mean to cause you offence in my comparison with the FSA!

  2. How can fund charges fall?

    There is the £1.6bn cost of RDR to pay for.

    Who does the FSA think is going to pay that?

    Clients.

  3. Fund charges ought to fall. If the provider is no longer paying me 0.5% pa then how will they be able to justify not reducing.

    Have said that is what ought to happen I have every confidence that most providers will naturally allow self interest to come into play and they will simply pocket the 0.5%

    Hopefully market forces will mean that charges do fall but with so much transparency now confusing clients I have my doubts.

    The FSA seem to have little if any idea how greed and the markets really work. Good intentions are not enough.

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