Two pieces of information came out last week that were very telling in their own ways.
One was Hargreaves Lansdown's half-yearly results. The other was a strange piece of research on behalf of GiffGaff, which revealed that, out of 2,000 UK adults polled, 48 per cent admitted to making bad buys just because there was a discount.
On average, canny shoppers saved themselves hundreds of pounds – but spent at least £6,000 on sale bargains over the past 12 months. Most of these bargains, they admitted, ended up gathering dust.
Now consider this purchasing parable in the light of Hargreaves Lansdown. Its interims showed weaker inflows in the second half of 2019, perhaps related to the negative publicity it received last summer.
In 2019 the direct-to-consumer platform kept the beleaguered Woodford Equity Income fund on its best-buy list until June 3, even though it admitted knowing there were problems with the fund.
The company's accompanying statement promised a review of its Wealth lists in the light of the debacle.
Despite all this, Hargreaves introduced 50,000 new clients during the period, bringing its total close to 1.3m.
According to broker Peel Hunt: "This suggests the business has not been overly impacted by the negative publicity relating to Woodford."
As platforms go, Hargreaves is not the cheapest. But it does offer a wealth of 'information' (such as best-buy lists), which, as far as many consumers are concerned, provide the 'guidance' needed to help them make their investment decisions.
Hargreaves will charge management fees, sure, but clients wanting to take out an Isa or self-invested personal pension feel empowered by a 'bargain' of ease-of-use, a cornucopia of information, and no initial cost of advice.
Even stung by Woodford, thousands of investors still think they can save money by cutting out professional advice. And when it goes wrong, they're left with a pretty bad buy.
This is not to decry Hargreaves or any other D2C proposition. There is a place for these in the market. But if we are to persuade less financially savvy consumers that a bargain isn't always a bargain, and could cost them thousands of pounds in the long run, the financial advice industry needs to do much, much more to promote itself as providing true value for money.
Disclaimer: The author has Isa investments on the Hargreaves platform
