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Exclusive: Hargreaves Lansdown's secret fee deal

Platform offered cheaper fees for customer looking to up sticks - "The special offer made to you here is exceptional"
August 24, 2022

A Hargreaves Lansdown (HL.) customer who told the platform he was switching to rival Interactive Investor because of high account fees was offered a secret deal to slash the amount he was paying.

The private investor, who did not want his name published, had decided to leave Hargreaves Lansdown after 10 years in favour of Interactive Investor. He had around £390,000 invested via a self-invested personal pension (Sipp), with a few holdings in a separate share account.

However, once he had initiated the transfer process Hargreaves contacted him as part of a “customer service check-in call” before sending a message offering to reduce his fees.

The message contained a defence of the platform’s charging practices, from the mention of discounts secured on fund fees to a cap on share charges within self-invested personal pensions (Sipps).

But it added: “We appreciate your loyalty over the years and whilst it is not our standard approach to have individual arrangements – with over 1.7mn clients this would simply be unworkable - in light of your comments, and having reviewed your accounts, I would like to offer you the following special arrangement. Instead of the standard tiered fund charge (starting at 0.45 per cent) we’ll apply a flat percentage fee of just 0.25 per cent on all managed funds (Oeics/unit trusts) up to the value of £1mn and no charge thereafter.”

While such offers have been made to Hargreaves customers in the past, they are not well publicised. The platform urged the customer not to disclose details of the offer to others, saying: “As the circumstances of your friends and extended family will differ from your own, we do request that you not share the details of your offer with other people so that we can avoid causing disappointment.”

A Hargreaves Lansdown spokesperson said its fee structure was "simple and transparent", and that "clients pay the platform fee plus any dealing costs and nothing else". "Platform services have always had the ability to apply an appropriate standard charging structure in certain circumstances," the spokesperson said. 

The effect of fees

Hargreaves Lansdown charges a 0.45 per cent fee on the first £250,000 invested in funds, 0.25 per cent on assets between £250,000 and £1mn, 0.1 per cent between £1mn and £2mn and no charge above that. By contrast Interactive Investor offers a flat fee structure that works well for large portfolios, while the next biggest rival AJ Bell (AJB) charges 0.25 per cent on the first £250,000 in funds, 0.1 per cent on amounts between £250,000 and £500,000 and nothing above that.

The customer said his average monthly fee with Hargreaves had been around £59, while by contrast the Interactive Investor flat fee structure would see him pay around £155 for a full year or the equivalent of three months at Hargreaves Lansdown. 

The individual was also surprised to learn he was paying more than originally assumed for certain Hargreaves services. He had seen communications from Hargreaves noting that customers can hold shares for free in some cases – but did not initially realise that a fee did in fact apply to shares held in a Sipp. “I don’t understand that, why it’s free in one and not the other,” he said.

He also assumed that the £390,000 in his Sipp meant he was paying 0.25 per cent fees as per the company’s tiered charging structure – but was in fact still paying 0.45 per cent as he only had £190,000 invested specifically in funds.

The extent to which Hargreaves offers ad-hoc fee deals is unknown, but it comes at a time when fee pressure is increasing across the industry. Hargreaves charges higher fees than many of its competitors, reflected in its higher profit margins compared to listed rival AJ Bell.

To tell us about your own fee deal experiences, contact david.baxter@ft.com.