This is the 5th of a series of eight blogs addressing the eight questions posed by the WPC. How important is investment transparency to savers? A short answer is ” a complete lot more important than most people think! Lord make me transparent – but not yet! I remember going to an event with Dr Chris Bier in a posh hotel in Hampshire.
Dr Sir described why the task he was doing on investment transparency was important. Universally Almost, he was derided to be a crank “clients just aren’t interested” one IFA informed the audience. Following Dr Sier was Mark Fawcett, CIO of NEST who confirmed the ongoing work Dr Sier was doing was important. Dr Sir, who was on the panel asked Fawcett – to demonstrate the transparency point – to tell the audience what NEST was paying for its asset management. Fawcett needed to acknowledge that he couldn’t – he had put himself under a non-disclosure contract.
Why investment transparency issues. Yesterday, thanks to a tip-off from an insider, I read Hargreaves Lansdown’s initial report on its 2018 figures. Of the £90bn Hargreaves Lansdown is wearing its system- around 10% is in cash and Hargreaves Lansdown is retaining 48% of the eye gained on that cash for themselves, trousering an awesome £42.1m in the process.
The pillage doesn’t stop there, this is actually the full post, displaying how HL plan to increase margins to 60-70 % this year – HL (rather than traders) profiting from the interest rate goes up. This is found embedded in the shareholder record, in other words – just how it boasts to the City. You receive find that true quantity being boasted going to SIPP holders. Long-term investment depends upon fractional charges which can, as time passes become hugely valuable.
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Hargreaves Lansdown haven’t always experienced £90bn under management, they’ve surely got to where they may be by supplying a great service -as has St James Place (HL’s primary rival for the nation’s “wealth”. But their success is made on trust and on knowledge sharing. Hargreaves Lansdown’s clients are one of the better informed on the market. HL has pioneered systems of assessing money and making finance selection easy enough for people to take action themselves. As a result they are a model for “direct investment” – something which is greatly important in getting investment as a recently available blog clarifies.
But all of this stuff on money can be considered a smokescreen. If you are pocketing 48% of the interest on non-invested money, you are profiteering on people’s indecisiveness and deserve to be called onto it. Taking half of the interest people should be getting on their savings – simply for having that money on your platform – is daylight robbery!
I will be sending this blog to the Chairman of the Hargreaves Lansdown IGC for these thoughts. I am hoping he’ll be requesting Peter Hargreaves and Stephen Lansdown for theirs. If the opinion is that HL have down were caught with their trousers, I will expect to see next year’s target for the “cash bulking” to be rather lower than the 40-50% in this year’s accounts. If HL see this as “treating their customers fairly – and the IGC agrees”, I’ll send the matter to the FCA.
If I have totally misunderstood, I will of course apologize! The same document offers other gems as boasting to shareholders. Go through the net revenue margin on their manager of manager funds – 74bps. The OCF of this money is 134-144bps which doesn’t include the platform charge of 45bps! The buyer needs to know very well what they’re paying. If HL can show value from its supervisor of manager funds that can justify a 2%pa holding charge, then I shall supply them with a value for money that will reflect it. Finding the ways that investment manages and platform providers to extract value from your investments is a forensic task and not for the faint-hearted.