OpinionFeb 12 2014

Scrutiny of charges shows RDR is working

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I have just spent a weekend away with a group of old friends. As inevitably happens with people in their 50s the conversation turned to retirement plans and investments.

But this time it was not investing itself but the cost of it that was the focus of the conversation.

Several are clients of Hargreaves Lansdown and had recently received details of the new charging structure – and they were not happy with what they had read.

The letter had for the first time made them realise how much they were paying and they were decidedly uncomfortable with what they were learning.

They were not the only ones. I have been approached by other friends in the past couple of weeks with similar concerns.

Potentially higher charges for reinvesting income are usually top of the agenda but others were unhappy at a new minimum £120 charge including VAT for a probate valuation.

I have been rather pleased at the tone of these conversations and the degree of scrutiny being given to the charges because it means that RDR is working.

These friends are all ordinary investors who have worked hard to build a decent nest egg and made other people very rich along the way.

Now at last they are asking questions about how much they are being charged and why.

In the past much of this information was not been available in a digestible form.

Now they can see what they are being charged for fund management, for holding their funds, for advice and for other services.

Those who are taking money from them will have to justify their charges – and if investors do not like what they see, they can move elsewhere.

Those who are taking money will have to justify their charges – and if investors don’t like what they see they can move elsewhere.

There is a word for this. It is ‘competition’ and it is already working to the benefit of consumers.

Charges in many areas are coming down, particularly for those who switch to unbundled funds.

Fidelity has created a marvellously simple charging structure for those happy to stick with investment funds. Several of my friends have spotted this and are considering switching to them.

It may not be the cheapest but it is unlikely to deliver a sting in the tail.

Those who want something more sophisticated can pay for it if they wish.

If, in the coming months, investors do move substantial sums we could see further price competition, which is what we should expect in any properly functioning market.

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Mortgages in the early 80s

I sometimes wonder where statistics dug up in research come from. HSBC published a price on property have and have-nots, which compared the current generation of property buyers with their parents.

The year chosen for comparison was 1983/1984. Now I know quite a lot about this era having been a property buyer myself then.

According to HSBC the average age to become a first-time buyer then was 27, the average house price was £17,021. The buyer would have earned £8316 and had to find a deposit of 12 per cent of their annual income. If only.

I worked in London as a journalist on a commercial property newspaper called Estates Times.

My salary was a tad less than £7000 a year, the house I bought with a friend in Colliers Wood, south London, cost £39,000. My share of the deposit was about a third of my annual income.

And, by the way, we had to pay interest rates which wavered between 12 per cent and 15 per cent.

House price and earnings inflation may have given us a boost. But Sunday lunchtimes consisted of a visit to the pub so we could use the launderette opposite.

Buying a house has never been a doddle – nor should it be. Mind you, it has proved a far better investment than anything most of my generation has dabbled in.

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MP’s slur on IFA integrity

It should come as no surprise that a former investment banker – Mark Garnier MP – launched a blistering attack on FCA chief executive Martin Wheatley at the Treasury select committee.

What is astonishing is the choice of subject; a supposed “commission lag bias” whereby advisers are allegedly choosing not to disturb portfolios in order to retain legacy commission.

Hang on a moment. Is not Mr Garnier firing his torpedoes at the wrong target here?

Surely if there is a “commission lag bias” those under the microscope should be the financial advisers who are leaving portfolios undisturbed.

Their prime objective is to advise clients, not to attempt to line their pockets with trail commission for as long as possible.

IFAs should be demanding a fulsome apology from Mr Garnier for this heinous slur on their integrity.

Tony Hazell writes for the Daily Mail’s Money Mail section. He can be contacted on t.hazell@gmail.com.