Hargreaves claims 11bps discount for Wealth 150 funds

Hargreaves Lansdown has claimed a negotiated annual management charge discount of an average of 0.11 per cent for funds on its Wealth 150 list, with the average charge falling to around 0.65 per cent.

The execution-only platform provider today (15 January) revealed its post-rebate ban pricing and said that from 1 March the average AMC for a Wealth 150 fund will fall to approximately 0.65 per cent, lower than the standard market AMC of 0.76 per cent for the same funds.

The standard discounted rate Hargreaves has ‘negotiated’ could, however, become little more than a market rate as other platforms rush to secure the cheapest deals. Last year Investec said it would be offering a ‘superclean’ rate to “selected partners”, also priced at around 0.65 per cent.

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Within the Wealth 150, 27 funds form the Wealth 150+ with a greater discount, bringing the average AMC to 0.54 per cent compared to a standard market AMC of 0.70 per cent for the same funds, the firm said.

As well, the level of rebate or “loyalty bonus” passed to clients on their existing fund holdings will increase to 0.75 per cent per annum for some funds.

The company also revealed its tiered pricing which comes into effect as a result of the Retail Distribution Review. Administration fees will be charged as follows:

• clients with up to £250,000 will pay 0.45 per cent per annum;

• those with £250,000 to £1m will pay 0.25 per cent;

• those with £1m to £2m will pay 0.1 per cent; and

• those with more than £2m will pay no charge.

Although clients will also pay an AMC for holding funds on HL’s Vantage Service, the company claims that the new tiered rates combined with the discounted fund prices will mean that most clients will be better off under the new system.

Hargreaves estimates the new system will have an £8m hit on revenues in the first year and a further £9m cost as the RDR commission ‘sunset’ rules approach in April 2016. It hopes to offset these costs by gathering another £3.5bn in assets over the next three years.

Ian Gorham, chief executive officer of Hargreaves Lansdown, said: “We have always sought to share our success with clients through using our negotiating power and by continually reinvesting in our service through new technology, more staff, better information on a wider range of investments, or as we have done here, in lower charges for funds.

“In 2011 we reduced charges for holding and dealing in shares by £9m when we launched our new low-cost stockbroking service. In 2012 we spent £7m introducing loyalty bonuses in the Vantage [self-invested personal pension].

“We are now reducing the cost of investing in funds, saving our clients an estimated £8 million per annum. As a result, most clients will be paying even less when investing through Hargreaves Lansdown.”