Hargreaves Lansdown will not copy other platforms in restricting investments into funds or trusts that do not appear to give value for money, arguing it would be wrong to deny its clients the choice.
Last week, interactive investor (ii) joined Fidelity International in removing funds from sale that fail to deliver value for investors.
It follows the new Consumer Duty regulation, which requires platforms to tell customers if the funds they have chosen could provide poor returns and ‘switch off’ funds that do not represent value for investors.
However, Hargreaves Lansdown head of client and product outcomes Mona Christensen said the UK’s largest fund shop was not going to block customers from purchasing any funds.
“Hargreaves Lansdown clients tell us that choice is very important to them and it would be wrong to deny them the ability to choose,” she said.
“Clients need to be presented with sufficient information to determine if an investment is right for them. Where a fund or trust does not represent value we engage with the managers to understand what they are doing to improve value for investors and their expected timeline for this improvement.”
Similarly, AJ Bell – another fund supermarket – will also not be taking the ii and Fidelity approach, noting that disclosure was better than disbarment.
A spokesperson for the firm said: “As an open architecture platform we give customers a wide-ranging choice of funds, bonds and shares, including investment trusts. We monitor funds and trusts through fair value assessments and independent third party assessment tools where necessary, and may notify holders where a fund is found not to be delivering value for customers.”
While ii is the only second major platform to take this approach, Lang Cat consulting director Mike Barrett said more could follow.
“Whilst not prescriptive, Consumer Duty is resulting in a lot of platforms taking this approach and, as a result, I can see more following. In particular the requirement to include other costs incurred by the consumer when conducting your own fair value assessments means you need to have line of sight of the other elements of the value chain,” he said.
“As a platform you are directly responsible for your own charge, but the fund charges (as well as advice and/or investment management) will impact the overall outcome the customer receives. If a platform decides these charges, combined with their own platform charge, are likely to result in poor value, then they must intervene.”
Interactive investor will remove funds based on their value for money assessments. Where one is not available – such as for European-based funds – ii will use a third-party tool to indicate if a fund would pass a report.
The platform will not publish a list of removed funds, according to a spokesperson for the firm, as it is “difficult to know how long they may be unavailable for when we are waiting for fair value assessments”, but would alert clients with regular investments set up.
“Given that platforms are required under Consumer Duty to ‘switch off’ funds which have been assessed as not representing value for money, this should focus fund management group minds on value even further and so restrictions, we would at least hope, need not be long term,” they said.
Fidelity, meanwhile, uses a governance committee, which looks at a number of factors including the reporting and accounting practices, investment performance, liquidity and costs.
A spokesperson for the firm said: “All decisions we make as a platform are with our customers’ best interests in mind and to ensure the delivery of the best outcomes possible for them. Our goal is to provide them with a wide range of choice while investing through our platforms.
“Like all firms, we have obligations, that we fully embrace, to be careful and responsible about the investments we make available – making sure these meet certain minimum criteria and standards.”