Hargreaves Lansdown has been described as a price maker in the investment platforms industry as Charles Stanley Direct, known among the cheaper offerings in the D2C market, hikes its fees 40% for platforms smaller than £250,000 ($319,154, €279,669).
The investment platform will increase fees from 0.25% to 0.35% on both funds and shareholdings from 10 September, resulting in higher costs for more customers.
Mike Barrett, consulting direct at the lang cat, said Hargreaves Lansdown is setting the agenda when it comes to pricing in the platforms market.
“Their dominance has shown that it is not all about price, so any changes to pricing, up or down, are only likely to have a small impact. As a result, I’d expect to see more of a clustering of platform pricing around the 35 to 45bps benchmark that HL have effectively set.”
Hargreaves Lansdown charges 0.45% on portfolios below £250,000, which Barrett describes as “relatively high”.
Charles Stanley Direct ‘not the cheapest’ platform
Barrett said Charles Stanley’s fee hike was because it “clearly felt their previous level was not sustainable”.
He explained that for the firm to compete with Hargreaves, it will need to demonstrate a similar service.
“I’m not sure they will see much in the way of an exodus as a result of this change. Charles Stanley were cheap, but they were not the cheapest. Any price sensitive customers are already likely to have been investing elsewhere.”
Charlie Musson from investment platform AJ Bell told our sister publication Portfolio Adviser it has no plans to increase its platform charge: “We aim to make it as easy as possible for advisers and investors to manage their portfolios by providing a slick online service at great value.”
A spokesperson from Fidelity also said it has no plans to increase charges.
Investment platform security costs
Magnus Wheatley, managing director of Charles Stanley Direct, said: “Whilst price increases are never a welcome or easy message to impart to loyal and long-standing clients, we hope that the necessity for the increase will be understood.”
He attributed the price hikes to costs associated with cyber security and systems to combat fraud rising in conjunction with increasing customer numbers.
“The pace of change in the digital world is evolving quickly,” he said, noting Charles Stanley Direct was constantly investing in modern channels and updating its service.
The hiked charges for the first £250,000 of funds will be 0.35% per annum, dropping to 0.20% on funds between £250,000 and £500,000.
For funds between £500,000 and £1m, this will fall to 0.15% and to 0.05% on funds between £1m and £2m.
However, for stocks and shares, there will be one platform charge of 0.35%, with a minimum of £24 and maximum of £240 per annum.
Charles Stanley Direct vs rival platforms
Wheatley said that, since launch five years ago, the firm has had low fees. He said despite the increases, the firm is still offering low charges.
Charles Stanley Direct commissioned Boring Money to conduct research to demonstrate its fees versus rivals.
He said the research showed Charles Stanley Direct’s new charging structure was better than a great many of its peers.
The Boring Money research compared the costs of platforms for three types of investors. These include:
- Portfolio 1: contributing £200 per month, start at £0, all in Isa, all in funds, calculated on deposits with assumed no investment growth or impact of charges on investment
- Portfolio 2: £30,000 invested in a mix of funds and shares, all in Isa, assumed investor is not charged stocks and shares platform fee for two months of the year since they have traded
- Portfolio 3: £80,000, £30,000 Isa, £50,000 in a Sipp, £3000 per transaction, holding a mix of funds and shares, assumed investor is not charged fees for four months of the year and £24 annual minimum is £2 per month.
| Portfolio 1 | Portfolio 2 | Portfolio 3 | |
| Old Charles Stanley Direct | £3.25 | £93.83 | £229.33 |
| Charles Stanley Direct | £4.55 | £113.83 | £289.33 |
| AJ Bell Youinvest | £21.25 | £97.90 | £245.80 |
| Alliance Trust Savings | £138 | £120 | £372 |
| Barclays Smart Investor | £60 | £68 | No Sipp |
| Bestinvest | £5.20 | £135 | £300 |
| Hargreaves Lansdown | £5.85 | £158 | £407.80 |
| Interactive Investor | £90 | £90 | £210 |
| The Share Centre | £69.60 | £137.60 | £470.40 |
Source: Boring Money
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