Fidelity has undercut Hargreaves Lansdown with the fees for use of its direct-to-consumer platform, with lower administration fees and slightly cheaper average negotiated fund charges equating to an approximate discount of 0.1 per cent for sub-£250,000 clients.
However, the platform faces a similar storm of criticism to that which greeted the revelations of Hargreaves’ pricing, amid claims that the refusal to automatically switch clients into the new structure and share classes will see the firm profit from client “inertia”.
In a live presentation online, Fidelity head of personal investing Mark Till revealed the platform will charge a single, tiered fee of 0.35 per cent for investments up to £250,000, 0.2 per cent on anything up to £1m and no additional charge on any funds above £1m.
The fee will be calculated on total money held with the platform rather than the number of accounts a client holds. Mr Till said clients will also not pay any exit fees, valuation fees or switching fees. Also, prices will be the same regardless of whether clients decide to deal electronically, in paper or over the telephone.
This amounts to a further attempt to gain a competitive advantage over Hargreaves, which includes in its structure a range of additional fees, for example for dealing in paper or for exiting the platform.
The rates undercut those announced by Hargreaves Lansdown last week (15 January), which included a charge of 0.45 per cent up to £250,000, 0.25 per cent up to £1m, 0.1 per cent between £1m and £2m, and no charge for anything more than £2m.
Including an average annual management charge of 0.64 per cent, an investor with up to £250,000 on the Fidelity platform will pay 0.99 per cent.
This is slightly lower than the average AMC of Hargreaves Lansdown’s Wealth 150 list, which the company said was an average of 0.65 per cent as a result of negotiations with fund groups. Hargreaves has said, however, that is has secured rates as low as 0.3 per cent for one equity fund and 0.15 per cent for one bond fund.
When including the 0.65 rate for sub-£250,000 investors the Hargreaves rate comes out at 1.1 per cent.
Discussing the Bristol-based broker’s pricing announcement last week, David Tiller, head of adviser platforms for Standard Life, said by “offering a dual pricing system for existing and new customers some platforms appear to be prioritising commercial interests over client outcomes”.
He added: “Rather than asking both new and existing clients to share the load evenly, some platforms appear to be protecting revenues by leaving existing clients in bundled funds. Client inertia over the next two years can maximise revenues for as long as possible, leaving clients accessing the same funds at a higher price.”
Fidelity confirmed during its webcast that the new prices would be “available” to new and existing clients, but in line with its previous refusal to bulk transfer it would not be automatically switching existing clients over.
A spokesperson for Fidelity confirmed customers would be told in writing about the new prices, and would be able to move some or all of their money at any time.
The spokesperson said: “Fidelity does not levy any switching charges but in a small number of cases, the fund manager may charge a bid offer spread or dilution levy.”
Hargreaves previously fiercely rebutted the criticism it faced following its own announcement, with head of financial planning Danny Cox saying: “There is a difference between a switch and a conversion and this terminology is important.
“As a self-directed service we cannot arbitrarily change client’s investments. We are giving our clients the choice. If they do nothing their existing inclusive funds will have a significantly increased loyalty bonus to 0.75% or more from 1st March. Or they can convert to the new unbundled units. There is no charge to conversion or tax to worry about.”
