Holly's Blog: Bye-bye Hargreaves Handcuffs


Bye-bye nasty handcuffs

This week Hargreaves Lansdown has finally announced it is lifting its exit fees. From now on customers will not pay account closure fees or any transfer fees for funds or shares. With the majority of transfers now being done electronically rather than with typewriters and biros, this is welcome news.

They could perhaps have stopped short from calling on others to do the same. This is a bit like Ozzy Osborne pitching up at your Christmas party and marching around telling everyone to put their drinks down in a very loud, smug voice. But it’s progress so good. All DIY eyes now on AJ Bell – you remain the only large platform to enforce exit fees.

In the evil Kingdom of Exit Fees, there is one massive beast blocking the door and that is St James’s Place. This FTSE 100 giant has a massive customer base and is a dominant force – but seems to get away with behaviour that smaller rivals do not. I have long spoken out against them for the simple reason that they have horrible opaque charges and exit fees by any other name.

With cunning verbal dexterity, St James’s Place calls its exit charge an “early redemption” fee and it applies to most clients who leave within six years of investing with them. This fee reduces annually from 6% to 1% over the first six years after investing.

I am going to be fairer to SJP than many commentators. I have spoken to many of their customers who feel looked after, enjoy the service and trust their adviser. That’s all great and I think it important to acknowledge that. But trying to find out what they charge is ridiculously hard and I don’t think most customers know about their exit fees – oops, silly me, I mean “early redemption fees”. It really is time to change.

Any DIY investors wanting to sense check their platform charges can look at our pricing calculator to see the charges laid out in £ terms. After that, it’s up to you to process this through your own ‘value’ filter to see if the costs are worth it to you. (I am reminded of the man who sold bed linen in Walthamstow market who used to shout “You buy cheap, you buy twice.” It is sometimes true. Our Best Buys tables will help you evaluate whether a service is right for you.)

Cheap… in fact, free

Last weekend I set up an additional 3 test accounts to expand those we cover. One of these was Freetrade. This mobile-first service is taking the fight to the incumbents with a very low-cost model which is great to see. ISAs will cost a flat £3 a month from the end of this year (no fee today). General trading accounts are free. And if you don’t mind being lumped in a pool with others and having a trade placed at the end of the day, there is no transaction fee to pay either. This means you could buy a Vanguard FTSE All World ETF here for no admin fees and ongoing product charges of 0.25%. Or a FTSE 100 ETF for 0.09%. That is very very cheap retail access to the stock markets. So far, so good.

But it won’t be for everyone. It oozes testosterone. There’s not much content, guidance or help and if you don’t know what you want to buy it could be intimidating. I also had a glitch when I opened my test account which took 24 hours to open and not the few minutes it should. This could raise questions about the systems behind the scenes… or to be fair it could just be bad luck.

But if you know what you’re doing and want a super low-cost app to manage things on – it’s well worth a look. They also do a good job of managing a community of engaged customers willing to share and have people on hand to take beginners’ questions.

That’s it for this week. Enjoy the sunshine this weekend, people…… Winter is coming :0)

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