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CORRECTED-UPDATE 1-Hargreaves Lansdown shakes up charges for clients
January 15, 2014 / 8:37 AM / 4 years ago

CORRECTED-UPDATE 1-Hargreaves Lansdown shakes up charges for clients

(Clarifies charging on sums above 2 million pounds, in final paragraph)

LONDON, Jan 15 (Reuters) - British investment firm Hargreaves Lansdown said new rules on mutual fund sales would leave most clients paying less while the impact on revenue would be easily absorbed at the firm’s current growth rate.

The firm said on Wednesday that a ban on fund managers paying commissions to distribution platforms through which retail investors access their products could cost it up to 17 million pounds ($28 million) in costs and lost revenues.

The new regulation, due in April as part of a shakeout of investment selling known as the Retail Distribution Review (RDR), will require an 8 million pound investment and could impact revenues by 9 million pounds in the first year, Hargreaves Lansdown said.

Following the financial crisis, regulators hope RDR will ensure investors are offered funds that match their needs rather than those which pay salesman or distribution platforms the highest commissions.

Hargreaves Lansdown said it would need to gather 3.5 billion pounds in new assets over three years to offset the financial impact of the new regime, noting that this was well short of the 5.1 billion pounds net new business it achieved last year.

While clients will now pay an annual charge for investing in funds through Hargreaves Lansdown’s ‘Vantage’ service, this is partly offset for them by the firm having negotiated relatively low management fees for the mutual funds.

“Most investors will be better off,” the company said.

From March 2014, the average annual management charge on mutual funds offered to Hargreaves Lansdown customers would be around 0.65 percent, the company said, representing a 0.11 percentage point discount to the market rate on the same funds.

Hargreaves Lansdown is also introducing a tiered charging structure for its customers, starting at 0.45 percent a year for those investing less than 250,000 pounds, dropping to 0.1 percent for investments of 1-2 million pounds.

On investments of more than 2 million pounds, there will be no charge on the sum above the upper threshold. ($1 = 0.6075 British pounds) (Reporting by Chris Vellacott; Editing by Simon Jessop and Mark Potter)

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