A decent runabout

The latest bout has been over HL’s recent launch of a low-cost retirement planning service introduced in response to the pension freedoms. This is by no means a Rolls-Royce service but it does offer some help for a fee of £395. This includes an hour with an adviser and a report on a client’s key issues including a cashflow projection.

It is not a full advice service but it is a type of low-cost service I have been long calling for; an affordable solution that the Great British Public can actually afford. Research suggests many do not want or cannot afford to pay more than £500 for pensions advice.

As usual, however, the comment forums have been full of what I can only describe as bitching and negative and often derogatory comments about HL and its new service. There is certainly some envy mixed in with these comments, and also far too much silly stuff which does not reflect well on the financial adviser community, from those who cannot see that HL’s model, for all its faults, is a highly successful one. Here I should disclose that while I am not a HL client, my wife has been in the past. My comments, though, are not related to any specific experiences we have had with HL.

Apart from HL, I am also a great admirer of full-service financial planning with all the bells and whistles. I believe that clients who have found a highly competent, experienced and professional financial planner or IFA have truly found someone who can transform their lives. However, it is not for everyone, and probably never will be for one very good reason: cost.

Saying that full-service independent financial planning advice is for all is a bit like saying everyone should have a Bentley.Most people would have to consider a less pricey vehicle that can be relied upon to get them from A to B. That is where HL comes in – it is the alternative to full-service.

It is worth remembering at this point that HL’s founders, Peter Hargreaves and Stephen Lansdown, were no wealthy pair of individuals who started up HL as a sideline. They were a pair of hard-working accountants who came up with a good business idea and launched it from a bedroom in 1981, selling investment products mainly through newspaper advertisements.

They struggled to build the business for a number of years, at great personal financial risk. Just over 30 years later the company is one of the largest employers in Bristol, with staff numbers heading towards 1,000. It has £50bn under management and is part of the FTSE 100. It also has a thriving financial planning arm for clients who want more than just execution-only.

It is not perfect, by any means. It has been fined by the FCA, it has been criticised for its investment approach and some have questioned its marketing tactics. Some of this criticism is fair, but overwhelmingly the company has shown the way for adviser firms.

I am astonished by the negative comments Hargreaves Lansdown attracts from other advisers

I know from experience that many advisers have worked in another area of financial services or perhaps come from other professions such as teaching, the military and even journalism. Most of them launch an advice business because they want to be successful and run a growing and profitable enterprise that provides a valuable service to clients. I have yet to meet an IFA who says he or she is desperate to run a struggling one-man band with no clear strategy and a handful of clients. Most advisers could learn a great deal from HL if they opened their eyes to the opportunities.

Recently, it has been good to see how many advisers have embraced the pension reforms and auto-enrolment by widening their net to help companies with auto-enrolment and new clients with specific pension questions. Much of HL’s success has been founded on doing just this – helping small investors. In HL’s case they found a huge number of smaller investors who were not being served by the banks, the investment providers or, to be frank, financial advisers. These were and are people who wanted to invest at modest cost but with plenty of information and guidance.

As the banks have fallen by the wayside and steadily withdrawn from offering a financial advice service to clients, HL and other similar firms have stepped in with their service, prospering as a result. If the advice gap is ever to be filled it will be through a dozen firms like HL.

Kevin O’Donnell is a financial writer and journalist

You said:

HA7Consulting, in response to the news of a potential long-stop consultation in the autumn (FA, 2 July):

If ever this does come to fruition (which is not a given) then today’s advisers will have to live to 100 to derive any benefit. This is no criticism of Apfa, which has to work at the regulator’s pace. This seems to be dead slow when any advantage to advisers is contemplated, and light speed when it comes to sanctions or detriment.