Hargreaves Lansdown

The new year is a time of reflection, and for many it will mean taking a good hard look at their finances.

One question all investors should be asking themselves is whether their platform is the best one for them.

The most popular stockbroker out there is Hargreaves Lansdown. The firm was first founded in 1981 by Peter Hargreaves, who started the broker in his spare bedroom in Bristol along with co-founder, Stephen Lansdown, using a couple of borrowed desks.

From these humble beginnings, Hargreaves Lansdown has grown into Britain’s leading investment firm, serving 1.9 million clients with a total £157bn in assets under management.

But in recent years, the company’s reputation has taken a hit, in part due to the Woodford scandal, as well as increased competition from rival trading apps.Peter Hargreaves started the broker in 1981 in his spare bedroom in Bristol - Clara Molden

Holly Mackay, of research firm Boring Money, said: “We have test accounts with over 30 platforms and Hargreaves Lansdown remains a really solid, reliable option.”

However, she continued: “I think they have undeniably lost their edge.

“Over the last few years, competitors have reduced costs, launched technology upgrades and added new features – against this more competitive backdrop, Hargreaves Lansdown has looked relatively less innovative.”

The broker said it continuously reviews its offering to launch new products, for example launching a venture capital trust online investment service in November.

Here are three reasons why you might be better off elsewhere.

High annual fees for funds

Analysis has shown that Hargreaves Lansdown can be one of the most expensive platforms out there for fund investors.

The platform charges 0.45pc for stocks and shares Isas with up to £250,000 in funds, then 0.25pc for £250,000 to £1m, falling to 0.1pc on £1m to £2m, and with no charge due on amounts of more than £2m.

A £20,000 investment in funds would cost you £90 a year with Hargreaves Lansdown, compared to just £53 with AJ Bell or £48 with Vanguard, according to Boring Money.

These calculations assume the investor makes two trades a year – incurring a £1.50 charge per deal with AJ Bell. Hargreaves Lansdown does not charge for dealing funds.

Hargreaves Lansdown is also a pricey option if you hold large amounts in funds. Firms such as Interactive Investor charge flat monthly fees, making them expensive for those with small pots but very cost-effective for wealthy investors.

Boring Money found that a £300,000 investment with Hargreaves Lansdown would cost £1,250 a year, about double what Fidelity charges (£600) and almost 10 times Interactive Investor’s £143 fee.

Story Continues

This does not mean Hargreaves Lansdown is the priciest platform for every investor out there. It is a relatively cheap option for those with less than £10,000.

In addition, it is free to hold shares, investment trusts, exchange-traded funds (ETFs),gilts and bonds in Hargreaves Lansdown’s Fund and Share Account.

A 0.45pc charge applies if these investments are held in a stocks and shares Isa, but capped at £45 a year. This rises to £200 per annum for a self-invested personal pension (Sipp).

Sam Richardson, of Which?, said Hargreaves Lansdown came out “middle of the pack” in the consumer association’s most recent survey of investment platform customers.

“While customers praised its quality of customer service and level of information provided about investments, they gave it just one star out of five for value for money – with the fees charged much higher than competitors in most scenarios,” he said.

Of course, some investors will decide the fees are worth it for a good service. The stockbroker has a high retention rate of 91.4pc and last year invested in new staff and technology for its help desk, while its app is also highly rated.

Share dealing

If you are an active trader, Hargreaves Lansdown’s charges are also relatively high, coming in at £11.95 per deal if you trade under 10 times a month. This drops to £8.95 if you make 10 to 19 deals and £5.95 if you trade 20 or more times.

By comparison, AJ Bell charges £5 for share dealing, falling to £3.50 for investors making more thna 10 deals a month.

A number of firms including eToro, Freetrade and Trading 212 have emerged in the UK in recent years offering free share dealing.

Fees are important to consider if you trade frequently.

Joshua Raymond, of commission-free platform XTB, said: “Given the uncertainty of the stock market and interest rates, the truth is the only thing an investor has total control over are the fees they pay to the platforms they use.”

Jeremy Fawcett, of research consultancy Platforum, said: “Hargreaves Lansdown does well on scenarios for listed securities because its fees are capped at £45 a year.

“But it comes up against stiff competition here from online stockbrokers including the new breed that offer free trading and custody.

“These services are usually more limited in scope than those that target people focused on long-term investing through a wider range of investments and tax wrappers.

“Price competition among these services is getting more intense and Hargreaves Lansdown is at the more expensive end of the spectrum.”

Remember that even if a broker is commission-free, there may be other charges to pay such as currency conversion fees when you buy overseas shares.

Woodford scandal

Almost six years since the infamous fund was frozen, the Woodford saga continues to rumble on for Hargreaves Lansdown.

The Woodford Equity Income Fund collapsed in 2019 because Neil Woodford had loaded up on illiquid assets, and was therefore unable to meet cash demands when investors rushed for the exit.Investors are seeking to sue Hargreaves Lansdown over Neil Woodford’s failed equity fund - Geoff Pugh

Some investors have still never forgiven Hargreaves Lansdown for continuing to recommend the fund via its Wealth 50 list right up until 2019 when investors were trapped inside.

More than 5,000 Woodford investors are suing Hargreaves Lansdown for the losses they incurred.

Claims company, RGL Management, said the claim was for “investor losses sustained as a result of Hargreaves Lansdown’s conduct in continuing to recommend [Woodford’s fund] right up to the day of its highly publicised collapse, despite Hargreaves Lansdown being aware of the fund’s long-standing portfolio diversification and liquidity issues”.

The stockbroker said in its annual report that it rejects all the claims made “for lack of a substantive basis of claim”.

It also said the law firm in question – who sent it a pre-action letter in March 2021 – has not confirmed it has sufficient funding to progress the claim, nor has it served Hargreaves Lansdown with a claim form.

A spokesman for Hargreaves Lansdown said: “One in three UK investors use Hargreaves Lansdown, making us the UK’s number one platform for private investors. Our clients tell us they highly value the full-service offering: the security of a trusted brand, the breadth of proposition and wide range of investment choices as well as access to our quality and personal client service.

“Clients can hold shares, investment trusts or ETFs in a general investment account free-of charge. Monthly investing via direct debit into FTSE 350 shares, selected investment trusts and selected ETFs is also free.

“We offer a free Junior Isa, and the fee on our Isa and Sipp is capped at £45 and £200 per annum respectively. HL clients also benefit from highly competitive interest rates for cash held in investment accounts.”

View Comments