Fund giants in spat with robo adviser over fee claims

Fund giants in spat with robo adviser over fee claims

Some of the best known providers in the stocks and shares Isa market have dismissed criticism they are overcharging investors.

Research from Evestor, a robo-advice firm, suggested wide disparities in the charges levied by firms for stocks and shares Isas.

Topping the charges list compiled by Evestor was St James’s Place. The FTSE 100 listed company charges 2.2 per cent in total for some products, with a 5 per cent initial charge.

Hargreaves Lansdown charge 2.16, while Fidelity charge 1.6 per cent. Those three firms are the top three most expensive on the list.

All charges are compiled based on a portfolio of £20,000, growing at 5 per cent.

However SJP, Hargreaves and Fidelity all disputed the basis of Evestor's research.

But Danny Cox, spokesman for Hargreaves Lansdown, said the comparison made by Evestor is “not comparing apples with apples".

He said this is because some of the providers on the list, including Evestor, only provide passive investment options, which are cheaper than active, while Hargreaves Lansdown provide both passive and active options.

Evestor charges 0.51 per cent for products on its platform, but only offers passive investments. The robo-advice firm said the comparison is not appropriate because its 0.51 per cent charge is for a portfolio of 14 passive investments, not just one. 

At the same time Hargreaves Lansdown pointed out it has passive investments with a charge of 0.06 per cent, which, with the platform charge of 0.45 per cent, come to 0.51, the same level as Evestor.

Evestor said its data for Hargreaves is based on the recommendation on its own site for a stocks and Shares Isa, which is a Hargreaves Lansdown multi-manager product.

The robo-adviser argued a product of 14 passive investments for 0.51 per cent creates a portfolio that corresponds to a risk weighting of balanced, which it says the right comparison with the Hargreaves Lansdown multi-manager fund it looked at. Evestor also said its 0.51 per cent charge includes transactions costs.

Evestor said it also offers advice on what to invest in as part of the 0.51 per cent charge. 

Hargreaves' Mr Cox said : “Investors should choose the investment service which is right for them.

"HL investors like the exceptional service we offer. Fees are an important consideration and should be viewed in the context of the range and levels of service on offer.”

The Fidelity number also appears to be based on active products.

Fidelity’s platform charge is 0.35 per cent, as opposed to 0.45 per cent for Hargreaves Lansdown, so the underlying fund would need to have a fee of 1.25 per cent to get to the 1.6 per cent number. The company do have some funds on its platform that carry a charge of 1.25 per cent, but the average cost of a fund on Fidelity’s 50 most bought active fund list is 0.80 per cent, according to the company.

Fidelity also offer passive funds, and has a UK equity tracker fund with a charge of 0.06 per cent, which, combined with the 0.35 per cent platform charge, is 0.41, and so cheaper than Evestor’s stated typical charge of 0.51 for a passive product.