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With a SIPP in drawdown - would Netwealth, Hargreaves Lansdown or Investec be a better option?

Steve | Lancashire| 22/01/2019 | 6

  • Private Pension
  • Robo Adviser
  • Online Investment Platforms

Steve's question in full

With a SIPP in drawdown would a company like Netwealth whose investment management fees are of the order of .66% of the value of the portfolio, be a better option compared to companies like Hargreaves Lansdown or Investec? What are the relative benefits of Netwealth over the more traditional wealth managers?

Helena Wardle's Response

Helena Wardle:

Good question.

When you are comparing charges of providers it is important to look at your objectives and think about whether the provider can facilitate them.

Consider what facilities you need and want and if you are prepared to pay extra to have those.

 

You are mentioning a SIPP in drawdown, so I take it that you are drawing on your pension?

There's therefore a few factors that you need to think of when assessing which provider is best for you;

  • How often do you need to withdraw from the pension?
  • Will it be regular withdrawals or as and when?
  • Have you already drawn tax free cash or will it be more efficient for you to take the tax free cash in stages?
  • Do you need a fund manager to help you decide on how to invest the funds within your pension? Or are you happy to research and make your own investment decisions?
  • Can these providers facilitate your pension needs in the way that you would ideally like, and if not, are you prepared to compromise to work within what their pension contract would allow?

It is worth looking at and comparing the drawdown facilities of the providers you have in mind, in addition to the investment funds.

It is also important to consider if what you are taking from your pension is sustainable to ensure your pension doesn’t run out before you!

 

Phoebe - Boring Money:

As for the difference between Netwealth, Investec and Hargreaves Lansdown...

This is quite a difficult question, given the specific requirements and peculiarities of your situation. 

While we can offer you our recommendations and general advice, it gets trickier when questions are about very specific investments or personal circumstance. We are not regulated to give you formal personalised financial advice. Nor are we regulated by the industry watchdog (although we do talk to them a lot).

This means we can talk about the generalities of different investment platforms and SIPPs – but it’s harder to be highly specific about different fee structures, as we don't know your personal circumstances.

 

However, in general;

First off, Investec don't seem to offer SIPPs - their Investec Click&Invest site FAQs state that 'Click & Invest does not currently offer a Self-invested Personal Pension (SIPP)', however the main Investec site confusingly does have a SIPP page in the 'For intermediaries' part of their site. On this page they don't mention their own offering. I contacted Investec about this while trying to find you a more concrete answer, but have yet to find out the definitive answer. 

Secondly, unfortunately comparing like for like (especially when looking at fees) is pretty tough. 

A general difference between the two platforms is that Netwealth offers a discretionary management service, while Hargreaves Lansdown offers self-selecting.

Unfortunately beyond this generalisation, specifics such as investment charges are notoriously difficult to compare.

In fact, we recently did a one year experiment to see if we could pin down exactly how much the differences in platform charges can affect a mid range portfolio. We found that the gap between the highest and lowest return after one year was £120. So the differences can be pretty big!

You can read more on our findings here - Who did best with £500? Best online investment platforms and robo advisors revealed

 

The difficulty in comparing the costs like for like for most investment products is in part thanks to the huge variety of terminology used by platforms, and also the fact that sometimes their fees can be a little hidden away on their sites.

However, Netwealth have a relatively helpful fees page and a slick interactive fees calculator which may be helpful to you.

Hargreaves Lansdown provides a nice straightforward fees page, dedicated specifically to SIPPs.

  • Ultimately, if you can find SIPP factsheets for these platforms this may well be your best shot at a roughly direct comparison. We can't currently track these down unfortunately, so we'd suggest contacting these platforms directly with your specific queries. While we can't speak for Netwealth, Hargreaves Lansdown have an exceptionally efficient telephone line. Often they pick up within 10 seconds! Speaking directly to these providers should help you quickly turn up the factsheets you need.

 

You can also take a look at our Best Buy pages for more general information about investing with Hargreaves Lansdown.

While we don't currently review Netwealth as part of our Best Buys, we have included them in our quarterly robo adviser results summaries.

Holly's write-up of our robo results from the 3rd quarter of 2018, is a nice intro to the topic or you can dive straight into the nitty gritty details.

 

Given the specific requirements of your situation, we'd suggest getting some regulated financial advice. Even if you just want some validation, we’d suggest you consider a session with a financial adviser. Some will give you an hour or two of consultation for an hourly fee. Check out Unbiased or VouchedFor.

 

Hope this helps!

 

 

Reader reply:

Steve, Lancashire

Thanks for that. Interesting.

Hargreaves Lansdown are market leaders but their costs are relatively high when you factor in all the actual costs plus VAT.

The Netwealth model is very interesting. In my case, they estimated they could save me about £90,000 in fees to be paid to my present provider over a 5 year period. That is significant!

Worth looking at their model more seriously. Surely MiFID II should shine a torchlight on what people are actually being charged?

After all, the recent FT survey highlighted client concern about exorbitant charges. The commentators need to wake up to this and take a more proactive approach when reviewing charges. The FT report published in the Weekend Money section on 1st December 2018 makes interesting reading, as it was a survey of clients and also wealth management companies. Both Investec and Hargreaves Lansdown were way down the listings--85 and 74 respectively.

The impression I get, is that there is still too cosy a relationship between the media & commentators and the wealth management industry!

There is great concern over "ad valorem" fees--% of value of portfolio--as compared to hourly rates. A comparison with Netwealth who charge £125/hours or an additional .2% on top of the charges, for comprehensive year round advise service, which in my case would be added to the wealth management charges .66%. The comparison would indicate almost a 3x increase!

Thanks again,

Steve

Our Expert

Helena-e1405011611549.jpg

Helena Wardle

Helena is based at Sterling and Law's practice in Hitchin, Hertfordshire. She began her career in financial services in 2006 at the Nationwide Building Society and started advising clients in 2008. She's a Chartered Financial Planner with experience providing regulated financial advice on everything from mortgages to estate planning. She’s also a qualified pension transfer specialist and all-round good sort.

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