Costs cheer for DIY investors as Hargreaves unveils fees shake-up

The Bristol-based group, which has three advisers in Yorkshire, is introducing a new annual charge for using its Vantage fund supermarket arm from March 1, but has negotiated a cut in the cost of a raft of top funds that will bring down overall fees for investors by £8m in the first year alone.

Its move comes in response to the City regulator’s Retail Distribution Review (RDR), which has already banned commission payments to financial advisers and is set to stop all such payments to platforms from April 6.

The RDR changes are designed to make fund fees more transparent, breaking down how much goes to the platform and how much to the fund manager.

Previously, investors paid a single fund management fee, of which a proportion was paid back to the platform in the form of undisclosed commission.

Under its new fee structure, Hargreaves will charge the typical investor 0.45 per cent a year to use its platform, although the amount reduces for larger investments.

On top of this they will pay an average fund management charge of 0.65 per cent.

The total will see investors typically pay 1.1 per cent, against around 1.33 per cent under the old pricing model.

Hargreaves said most investors will be “better off” from the new charges thanks to the lower fund charges, with some fees as low as 0.54 per cent on selected funds.

It estimates overall client charges will be cut by £8m over the first year, at a cost to the group’s revenues.

But it cautioned there may be a further £9m hit after April 2016.

The group said it would need to bring in around £3.5bn of new business over the next three years to offset the cost of the changes, adding that benefits of previous price cuts had outweighed the impact.