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Hargreaves to consider trial period with no exit fees

MO: Who is your typical customer?

IG: “We try not to have a typical customer. There are clients with £20 up to £20 million on the platform. The average is £70,000, with 55 per cent in funds and 30 per cent in shares. The rest is in a mix of cash and investment trusts or exchange traded funds. 80 per cent of our customers have less than £100,000. By number it’s small investors but there are also investors with substantial amounts of money.”

MO: Your charging structure is complicated with separate charges for Isas and Sipps, plus a percentage fee for fund holdings and a flat fee for listed investments. Lots of readers say they find it hard to get to grips with the overall cost of investing and find your charging structure confusing.

IG: We’ve tried to make it as simple as we can. The truth is that different investments have different charges. Your basket is free and then we need to charge you for the assets you put into it and they have different costs associated with them. We think the direction we have gone in is the right one.

“We’re very clear and open about the charging structure. We have to be competitive against stockbrokers and others. It would be fantastic if we could get to a situation where there is one charge. But it is very difficult to see how that would be done.

MO: How do you justify keeping exit fees when other platforms have abolished them?

IG: Across the market it’s a pretty common position to have exit fees. It costs money to transfer investments in stock. It’s much harder work than people give credit for. It’s also very manual.

MO: You’re asking for a big leap of faith from investors who want to try your service and are immediately locked in by exit fees.

IG: There are ways of doing suck it and see. Start an account and see if you like the service. Maybe there are ways we should give people a “try it for a while” arrangement. We’ll have a think about that.

MO: Our readers want more analysis of investment trusts. For example the asset allocation tool doesn’t analyse the portion of their portfolio that is invested in investment trusts.

IG: We’ll have a look at the analysis tool as an IC request.

I also spoke to Hargreaves Lansdown’s head of investment research Mark Dampier about the Wealth 150 list of funds. I asked him to explain the purpose of the Wealth 150 list and how funds are selected. I also asked him to justify the inclusion of under-performing funds Aberdeen Latin American Equity and Legg Mason US Smaller Companies. I also asked him why no investment trusts are included in the list. He said: “It’s very hard for us to get data on investment trusts. Most are too small for us to fulfil execution-only orders.”

You can watch my interviews with Mr Gorham and Mr Dampier in full here.