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Hargreaves Lansdown denies charging 'rip-off' ISA fees

HL has reacted to a study claiming it and St James's Place are 'ripping off' ISA clients.

Hargreaves Lansdown denies charging 'rip-off' ISA fees

Hargreaves Lansdown has reacted to a study accusing the business of 'ripping off' clients in stocks and shares ISAs. 

The report, from financial advice platform evestor, showed that the most expensive products on the market charges 2% in fees, four times greater than the lowest.

Those at the top end of the spectrum included offers by Hargreaves Lansdown and St James's Place, evestor claimed, with both charging more than 2% a year.

St James Place could not be reached for comment at the time of publication.

Evestor pointed out that this meant £432 would be taken in fees and charges over one year on a £20,000 Hargreave equity ISA.

Over five years savers, could be paying over £2,390 more in fees than they would with the lowest available product.

Other financial giants named as having high fees (see table below) include Fidelity (1.6%), Santander (1.4%) and HSBC (1.07%) 

Provider Fees and charges as a percentage Fees and charges (annual total) Fees and charges (after 5 years) Representative returns without fees and charges(after 5 years) 1 Representative returns with annual feesand charges (after 5 years) 1
St James’ Place 2.20% + initial 5% fee £1,440 £3,315.78 £26,764.51 £21,696.73
Hargreaves Lansdown 2.16% £432 £2,395.36 £26,764.51 £22,885.41
Fidelity 1.60% £320 £1,795.32 £26,764.51 £23,547.89
Santander 1.40% £280 £1,557.51 £26,764.51 £23,788.17
HSBC 1.07% £214 £1,214.05 £26,764.51 £24,188.92
Nutmeg (Fully Managed) 1.04% £208 £1,080.75 £26,764.51 £24,225.62
Virgin Money 1.00% £200 £1136.29 £26,764.51 £24,274.62
Natwest Wealth 0.95% £190 £1080.61 £26,764.51 £24,335.98
evestor 0.51% £102 £585.50 £26,764.51 £24,881.33


Evestor CEO Anthony Morrow said: ‘Even with a crackdown on fees and charges, British savers are still falling victim to investment giants eating into potential returns.

'It’s especially shocking to hear of cases where wealth managers can be earning twice as much from adviser fees as their customers’ earnings.

‘The magnitude of the complex different layers of costs and fees for stocks and shares ISAs has been exposed by our research – and it’s been a headache for our experts to understand, let alone consumers.' 

Hargreaves Lansdown questioned the methodology behind the report. 

'This isn’t an apples with apples comparison,' said senior analyst Laith Khalaf. 'Evestor are quoting the price of their passive portfolios which use ETF’s and I think they have quoted one of our actively managed solutions.

'At least two of the other providers on their list just offer passive solutions, so that would be a fairer comparison. HL also offers passive investments from 0.06% so a total of 0.51% including our platform fee.

Khalaf also highlighted that, by its very nature, active management is more expensive. 

'The key to its value is whether this active management grows your money faster than a passive solution after allowing for fees over the long term. 

'Investors can choose between a low cost passive solution  and paying more with the hope of getting more. For those who are unsure, passive is a good choice as they provide low cost exposure to the stock market, which, over time, will provide a much better return than hanging around in cash.'  

'Fees are an important consideration and should be viewed in the context of the range and levels of service on offer.' 

Morrow believes the best way to create clarity around charges is to outlaw complex fee structures entirely. 

'[Instead] there should be one simple all-in cost disclosed immediately the moment an account is opened. Without question this should include the cost of everything - from advice platform to the underlying transaction costs of the funds.’

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