Peter Hargreaves’s attack this week on Hargreaves Lansdown, (reported in the FT) the funds supermarket he co-founded, has not only raised awkward questions about the company’s strategy.
According to the FT “The new advice service will involve giving customers personalised “nudges” or notifications on their phone with prompts to invest, or to hold more cash in a rainy-day fund, among other tips.
The move would set Hargreaves apart from its rivals, including AJ Bell and Interactive Investor, which remain execution-only. Other low-cost entrants have popped up in recent years offering cheaper advice than the face-to-face support traditionally offered by wealth managers to richer clients, with charges running to around 2 per cent of the portfolio value per year.
New companies include, for example Netwealth, where automated advice is supplemented by personal services, for which extra fees are charged. Netwealth said its total cost, including annual advice, is 1 per cent.”
The last paragraph of the article said “Rae Maile, an analyst at Panmure Gordon, said: “There is a huge gap and need for advice. People don’t know where to find it, or what it will cost. In an age where things are more complicated, in terms of financial products, tax allowances — is there a need for advice? Absolutely.”
Rae Maile is 100% correct. There is a massive need for help and advice,. It doesn’t matter if you have only £10 or £100m….the amount is irrelevant. Everyone needs advice. Yet the advice numbers don’t work. Which is why Hargreaves is moaning. If a wealthy investor pays 2% each year, so on £1m, that’s £20,000 in fees, that’s more than what some people have to invest!
So how can the less wealthy pay for advice?
Now that is the question that has no real answer. Sadly.
For our part, if we get enquiries from individuals who want help but struggle to pay fees, we try to help or point them in the right direction. Even if it’s what books or blogs to read.