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Hargreaves Lansdown’s approach to Investment Trusts Totally Unacceptable
ynys
Posted: 16 January 2014 01:11:38(UTC)
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I know this has very much been pointed out in other threads, but I wanted to highlight this grievance.

In brief, Hargreaves Lansdown’s are trying to pretend investment trust companies are somehow different from other FTSE companies in order to extort more money from their clients.

And where does one begin?

Is it legal to treat listed stock market companies differently? AITC should consult their lawyers, lobby MP s

Which companies and which are not investment trusts? Sure FRCL is one but what about 3i what about British Land a lot of property companies are sort of IT s

How penny pinching is this? Why on earth not hold an investment trust or two amongst one’s share holdings, without being penalised?

The assumption that investors can’t buy and hold non investment trust shares like they would investment trust shares is nonsense and anyway is going down the route of inactivity fees by the back door.

This is just so stupid. Why alienate investors? Why make them think again about whether to stay with HL or look for a better deal. Actually 0.45 percent is quite high there may well be better deals. Investors should shop around.
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Alan Selwood
Posted: 16 January 2014 08:56:31(UTC)
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I agree that it is totally ridiculous to treat ITs as different from other shares. They are, after all, close-ended investment COMPANIES! In other words, they are companies, but they happen to have as their business the management of holdings in other companies, rather than any other business sector. How, then, will they treat conglomerates that have subsidiaries and are prepared to increase holdings in them or dispose of them when it suits them? Or VCTs? Or private equity firms (3i, as has been mentioned)?

This new charging structure strikes me as a reaction by H/L based on fear. They have noticed the trend of using ITs instead of funds, and can see their own financial lifeblood ebbing away.

They need to revamp the charges before they get a significant revolt from the savvier users.

Being good at marketing, they will probably convince the rest that black is white.
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S Dobbo
Posted: 16 January 2014 09:12:08(UTC)
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Alan Selwood;22580 wrote:

Being good at marketing, they will probably convince the rest that black is white.



I think they have:-

Hargreaves Sparks Platform Price War - Morningstar
"Britain’s largest retail investor platform, has today announced it is slashing the cost of investing in funds for hundreds of thousands of investors from March 1."

Hargreaves Cuts Fund Charges - Morningstar
"Britain's largest direct investor fund platform Hargreaves Lansdown has significantly cut fund charges. Eighty per cent of Hargreave's 500,000 clients will pay less to use the fund supermarket from March 1. "

Leading investment adviser Hargreaves Lansdown sparks price war - Guardian
"Hargreaves Lansdown, the UK's biggest investment adviser, has sparked a price war in the fund management industry after slashing charges to its 500,000 customers."
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P L
Posted: 16 January 2014 09:20:46(UTC)
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The argument put forward to explain the special treatment of IT's is totally bizzare.

However you are looking at it from an investor standpoint and applying logic.
HL on the other hand have looked at it purely the from the Profit/Loss account perspective and having realised that there is likely to be a drift towards IT's so need to widen the target area.

Out of all the share holdings you have what proportion of Corporate Actions have been applied to IT's and then tell me you're surprised to see a new charge applied to cover this.

Basically we know the score, HL need to make 0.6% on average on every account to keep the readies rolling in and their stock valuation up. The others appear to have settled on a more modest 0.15-0.25% range.

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David 111
Posted: 16 January 2014 09:22:09(UTC)
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Ynys - I certainly agree. I too have wondered how HL is going to define what is and what is not an investment trust. How they classify property shares will be interesting.

I also think AITC should be straight on to this if they have anything about them at all.
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P L
Posted: 16 January 2014 09:35:23(UTC)
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What would be useful is coming up with some thoughts on a workable exit strategy.

Do I

A) Simply transfer my fund holdings (say 15 funds, transfer cost:£375) hoping I get a golden handshake which then covers some or all of it.
B) Free switch into a single fund or cash (transfer cost: £25) and take the market risk
C) Switch entirely to ITs (Cost: £180 + £45) and hope no one else catches on
D) Sell one by one and extract the cash (no good for the ISA holdings)

Then there is the Re-Entry costs (~£150+account admin)
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Guest on 21/01/2014(UTC)
TJLamb
Posted: 16 January 2014 09:37:30(UTC)
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It is worth checking the Telegraph as well.
I haven't had a chance to read the articles properly but I got the impression the coverage was about investors having to pay more, not less?
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Micawber
Posted: 16 January 2014 11:14:43(UTC)
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Recalling an article from the Mail in 2011 which flagged up HL's opposition to investment trusts (apart from one that paid commission)::
http://blogs.thisismoney...-commission-that-is.html
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Alan Selwood
Posted: 16 January 2014 17:45:06(UTC)
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S Dobbo;22584 wrote:
Alan Selwood;22580 wrote:

Being good at marketing, they will probably convince the rest that black is white.


I think they have:-

Hargreaves Sparks Platform Price War - Morningstar
"Britain’s largest retail investor platform, has today announced it is slashing the cost of investing in funds for hundreds of thousands of investors from March 1."


The devil is in the detail.......! [imagine smiley here of a little red devil, with trident and forked tail]
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Spartacus
Posted: 16 January 2014 20:28:06(UTC)
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I've always found HL's approach to Investment Trusts rather interesting. HL seem to regard them as spawn of Satan and seem to be like an actor hearing the words "Macbeth" when theiy're mentioned. Yet they must know that many of their more sophisticated investors have stacks of them - in fact one of the directors of HL recently confessed to having most of his portfolio in IT's!

This move strikes me as opportunistic, as pointed out before IT's are probably cheaper than vanilla companies for HL to admininister and I hope and suspect they'll reverse this decision.
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Sebastian99
Posted: 17 January 2014 07:58:37(UTC)
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As I have both shares in companies and shares in other companies that HL think are somehow special, it seems it is now time to consider a different provider while I have 90 days to switch out without charge. After all, if ITs are special today, what other (types of) company will become special tomorrow. Do I want to wait and find out?
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Guest on 20/01/2014(UTC), Guest on 21/01/2014(UTC)
Dan London
Posted: 17 January 2014 15:05:45(UTC)
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P L;22590 wrote:
What would be useful is coming up with some thoughts on a workable exit strategy.

Do I

A) Simply transfer my fund holdings (say 15 funds, transfer cost:£375) hoping I get a golden handshake which then covers some or all of it.
B) Free switch into a single fund or cash (transfer cost: £25) and take the market risk
C) Switch entirely to ITs (Cost: £180 + £45) and hope no one else catches on
D) Sell one by one and extract the cash (no good for the ISA holdings)

Then there is the Re-Entry costs (~£150+account admin)


I think there are a lot of us in this exact position with even larger amounts of Funds mainly in investment Trusts and individual shares...where to go ?
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Guest on 21/01/2014(UTC)
Sebastian99
Posted: 17 January 2014 15:19:39(UTC)
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The exit strategy is very simple if you decide to take it. Read clause A7.

You have 90 days to end your contract without charge.
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david rogers
Posted: 17 January 2014 21:42:59(UTC)
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It is only about a year since Hargreaves himself went on record as describing ITs as a dying breed. Now he sees the growing threat to his pocket and decides to discriminate against them
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Alan Selwood
Posted: 17 January 2014 23:08:12(UTC)
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david rogers;22625 wrote:
It is only about a year since Hargreaves himself went on record as describing ITs as a dying breed. Now he sees the growing threat to his pocket and decides to discriminate against them


Ah, note the fragrant blossoming of the marketing spiel - so attractive.......... - as long as it suits one's purpose! Money still rules, despite the requirement to be transparent! (So what's new there, then!)
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Linda Green
Posted: 18 January 2014 09:42:59(UTC)
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I've got 15 funds in my Sipp, all oeics. This will cost me £200 a year approx. If I swap them for investment trusts there will be a charges cap of £45.
Is this correct?

The negative side would be the dealing costs or reinvesting the dividends. I would have to let the cash accumulate and deal less often.

opinions welcone on this.
chazza
Posted: 18 January 2014 10:51:11(UTC)
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Linda,

the problem - and the reason it is so difficult to compare - is that the residual charges (made by the funds managers themselves) will vary. On the whole, most funds will, even with the HL holding charge, probably be cheaper than now.

With investment trusts, as well as the HL holding charge, you pay the managers' fees (check out TERs on Citywire - in many cases they are higher than those on funds), and, as you say, you will have dealing charges and stamp duty (though there are some trusts that evade the latter by being foreign-domiciled - e.g. AIF and UEM – which also pay income without the usual 10% tax deduction – 2 good reasons for holding them in my SIPP and ISA).

I like the transparency of ITs - I can buy/sell them at a known price at a time of my choosing - with funds there is always at least a day or 2 in limbo when prices can move either way – so better to drip-feed purchases of funds and to buy/sell ITs in more substantial chunks on the down/up days.

That apart, the only reason for holding ITs rather than funds is performance. In rising markets, ITs generally perform better than funds because IT managers can borrow to invest (gearing). This increases risks (and costs) but in a rising market, it pays off. But I am a little worried that, now that discounts on ITs have narrowed considerably, they are more vulnerable than funds to a market reverse. It is interesting that in the past year overall performance on several popular ITs (notably FGT) has been no better than the very similar funds run by the same managers.

I quite deliberately have a mix of ITs and funds – the best emerging markets funds have mostly fared better than comparable ITs but when emerging markets rebound from present lows, the biggest gains may well be in ITs.
I hope that helps.
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chazza
Posted: 18 January 2014 11:06:13(UTC)
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I talked to someone at HL this morning.

At first she was very reluctant to concede that there was any change in HL’s treatment of Investment trusts. When I contradicted her, she then said it was forced by RDR. When I contradicted that, she conceded and changed tack, saying that HL has always charged for holding ITs. Again I contradicted her: no, they had never charged for holding ITs in the Vantage share account, and although they did charge for holding anything that was not a commission-generating fund in an ISA, now HL is proposing to treat ITs as a separate and distinct category, in addition to the fees it charges for holding shares etc. Again, she conceded and confessed that the reason they are introducing a charge for holding ITs is to try to recoup some of the income that will be lost from funds as a result of RDR.

So it is now clear. HL see ITs as competing with funds and fear that folk who hold ITs will not trade them often enough to generate income from dealing charges comparable with the 0.45% fees for funds. Perhaps if they reduced the dealing charges a tad, they might encourage more trading …. But HL is fundamentally a funds-marketing organization and ITs just don’t fit the model.
I expect more changes (and charges) before long.
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busy bee
Posted: 18 January 2014 12:52:45(UTC)
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I also phoned HL this morning.

Charges for my in-law will double overnight because they hold Investment Trusts. A cynical plot by HL to double their fees. Totally unacceptable and I shall not recommend HL as I have in the past.

Next the hike for holding Unit Trusts - ok they say the charge by HL will be offset by an improved annual loyalty bonus (and admitted that this is taxed so 20% lost there and then) and we can save fees it we swap to 'unbundled' funds. I will have to wait to see on that.

HL should remember that they will lose more clients and have disgruntled clients who would to put up with the odd glitch because of good service and reasonable charges. Now all that goodwill is gone - we should all complain like fury at anything - this will then eat into the doubling of their fees when holding Investment Trusts and shares in the same p/f. A good wheeze that one.

I would get out for my in-law if I could - but I will now re-consider the vantage accounts held by my children through - I am actively searching if HL read this - so they will lose 3 clients just like that !
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TJL
Posted: 18 January 2014 12:56:06(UTC)
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There is an interesting thread on Motley Fool (Investment & Unit Trust board), including links to some other articles and a man who is drumming up support to take HL to the small claims court.
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