Hargreaves are losing the baby boomers!

Funnily enough - I have five holdings left on H&L and I just spoke to a financial friend as to whether it is worth cashing in these five and moving them over. H&L have on going charges that are just a rip off. All my new trades are on this platform for sure! I just need to wait for my dividend date and then I will be cashing in [insofar as they are on the up]. I also read the Times article and it does not suprise me at all to be honest.
So what is left? Freetrade you need to get the ā€˜dividend festā€™ happening :slight_smile:
I am using that terminology on the pretence that it has not yet been trade marked :slight_smile:

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Itā€™s 0.45% for an ISA capped at Ā£45. Assuming just the basic freetrade account thatā€™s only Ā£9 more a year for ongoing fees.

How is that a rip-off?

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And with a stock universe that is several times larger than Freetradeā€™s one.

Freetradeā€™s offering is a great one for many people. But the fact remains that it is not for everyone. And as far as I can see Freetrade doesnā€™t pretend otherwise.

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Ā£1 min reinvestment of dividends off Ā£10 sounds like a rip off to me.

That is the charge for an ISA and I am not aware of the cap. Looking at a holding - take RELX for example, their charges are 0.63% pa if in a ISA and for funds is even more. For normal S&S it is 0.18% and with an Ā£11.50 buy and Ā£11.50 sell charge it makes the fees rather rather high. Many years ago I started on iii and their charges made my investments not worth it. I then went onto H&L and after a while it feels the same. I agree that it depends on what the investor is after and not all platforms are suitable for all.

yes - there are lots of little items such as the one you highlight and after a while if feels like it does nothing but drag you down.

thatā€™s not an ongoing platform fee. I get your point though. Freetrade also doesnā€™t even offer reinvestment. I think its a little high, it depends on your needs, there are platforms that are cheaper and more expensive for reinvestment.

That is the charge for an ISA and I am not aware of the cap

yes, thatā€™s the ISA platform fee and cap. for a GIA, its Ā£0

you might need to expand on this im not sure it makes sense. Are you saying thereā€™s a platform fee of 0.63% for a S&S ISA, and 0.18% for a GIA? This isnā€™t correct. REL has a 0.45% platform fee in a S&S ISA capped at Ā£45, and no platform fee in a GIA.

HL donā€™t charge platform fees for ETFs and shares on the GIA, for an ISA its 0.45% capped at Ā£45. thereā€™s no variation unless youā€™ve agreed a lower platform cost with them yourself (which is an option depending on how much you have invested). Im not sure where youā€™ve got the 0.64% and 0.18% from?

Freetrade donā€™t offer funds so they donā€™t really have any way of comparison.

These arenā€™t ongoing charges but I get your point. for trading it really depends on what youā€™re doing. Ā£12 for a 10k buy isnā€™t much, but its expensive for lower amounts. and if your regularly investing, which most people are, then the trading cost is only Ā£1.50 per share per month.

Hey - I think my messages got misconstrued.

  • as you say FT does not offer reinvestment, but H&L does at a cost, which it appears that we all agree is a tad high, but there are more expensive platforms out there. As you also point out in one of your messages, for lower amount investors - it does drag you down. For higher players, not so much so.

  • The RELX example relates purely to H&L. I was highlighting that there are additional charges on an H&L ISA not just the 0.45% and the percentage of these addtional charges is even more for funds. However, I was not aware the 0.45 ISA was capped and I cannot see that written either? If you look at RELX (on H&L) and scroll down to finicials & dividends, News & Research and scroll to the right you get: ā€˜chargesā€™. Select this and it gives you pa charges for ISA / S&S / SIPP and that is where I got the figures from.

  • agreed - if you are purchasing small amounts the Ā£12 can add up. This also depends on whether it is a short or long term investment.

Ah, ok I see where the confusion was. I see the .65%

theyā€™re adding up a ā€˜total costā€™ on an example Ā£5000 investment over 5 years.

0.45% platform fee,
0.5% stamp duty
entry cost (Ā£12)
exit cost (Ā£12)

comes to a total of 0.65% in an ISA, and 0.18% on a GIA as thereā€™s no platform fee.

I was thinking of the ongoing platform cost. e.g. 0.45% in an ISA to a max of Ā£45 (fees are here ISA Charges & Fees For The Stocks & Shares ISA | HL). 0.65% isnā€™t an actual fee, but a indicative total % cost over the asset value over a time period.

Shares
Including UK and overseas shares, investment trusts, exchange-traded funds, VCTs, gilts and bonds.
0.45%
Capped at Ā£45 per year

Freetrade would have the same, for example, for the same calculation in a S&S ISA, Ā£5000 worth of REL over 5 years. Your average annual charge would be around 0.72%~ a year

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Okay I see - thank you for providing clarity and the link to H&L cap. I guess in comparison to FT - it is the buying and selling fee of the Ā£12 that can have an impact - for lower investors like me! I have changed tact from when I first started investing as I was doing short term, whereas now I am longterm. I have five stocks on H&L and will probably leave them ticking over on there.

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Yea as you said I think it really depends on what your doing.

If your planning to invest smaller amounts and invest in and out of stocks ā€˜frequentlyā€™ at any time then the costs at HL can add up quickly.

Long term stocks or ETFs investing in a regular bases (at Ā£1.50) or one off large investments the cost becomes more more reasonable. Freetrade is cheaper in a number of scenarios, just depends on your needs and trade offs

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I see disruption as starting with accounts, then AUA, then revenue and finally later down the line profitability, as growth is prioritised over profitability. Lots of markets are wide open for neo-brokers e.g. new brokers are still launching in the UK despite being late to the party.

If Freetrade ended up with loads of wealthy clients they could add specific partner services which suit those clients needs and monetise that way. Larger clients will be more likely to pay for Alpha, SIPPs, generate more from FX and share lending etc

Disruption of accounts? Well Hargreaves account numbers are going up as is its AUM.

You want to talk about Freetrade - but you are forgetting that Freetrade is not actually disrupting HL. Not even close. It is not even clear that it is attempting to do that.

It might be a long term ambition to challenge HL - but it has to survive long enough for that. Not just survive but provide a competitive product and service levels. It may die or just be gobbled up (which of course could be a good exit for some investors).

And on that note many of those new brokers you refer to will disappear. Just like many of the neo brokers from the past (yes it is not the first time that cheap brokers have come along). I use the term ā€˜cheapā€™ advisedly and I am mainly using it in reference to the time they existed.

Many of the new brokers donā€™t have sustainable businesses. One wealth manager has already exited. But I agree with you that one or more will ā€˜make itā€™. Which one? Well I donā€™t know.

It is early days for the ā€˜pan europeanā€™ space. We donā€™t fully know how the niches will break down. We donā€™t know if a London based organisation will be perceived well in the EU space. What we know is that the competition in some of those countries will be tough.

There are many, many cultural issues to be tackled - and even more so in France and Germany. One of the reasons is the disparate way pension arrangements are made in different countries.

And as far as the UK market is concerned anyway does anyone think Hargreaves will roll over and die? What do you think would happen if they dropped some of their trading charges?

Freetrade still needs massive injections of capital. Itā€™s present business model is a starting model and imo isnā€™t sustainable. And the recent share lending revenue stream story underlines that Freetrade needs a clear path to profitability.

My own way of looking at things is in terms of pluses and minuses. Good investors weigh these up. There are enough fan type investors to sing about the merits of FT and shout down the risks and challenges.

I speak as someone who worked for one the worldā€™s biggest fund managers and the ex CTO of a very successful startup. I think I know a little bit about this market - and also how tough it is to make it.

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Yeah, its worth remembering that the UK actually has a pretty horrible investment uptake by the regular person

3% of the population have a S&S ISA, this is a fairly solid stat though a couple years old. the number of people who say they have any sort of shares is apparently around 30%. Some of this i expect comes from employer share programs. the extremely poor uptake of tax efficient share accounts speaks for its self i think. and it means there is potentially million of potential customers out there that donā€™t have an HL account.

I donā€™t think its a game of taking customers from other platforms as much as it is making new share holders.

This is hopefully a future ambition. I think to freetrades determent theyā€™re just not a platform that holds well to wealthy clients (for now), theres to many holes. thats my opinion at least. holes i hope get filled eventually.

Honestly, they shouldnā€™t have taken away the Ā£1 trade feeā€¦ just my opinion i know nothing on the actual data. but Ā£1 was highly competitive. people always made the comparison to 212 but at the time freetrade never looked like it was aiming at a 212 competitor. they never lent shares, they never used loss making products (for the customers) to fund the business, the platform was always quite transparent and clear on share holdings. they fit i think between 212 at the bottom, and HL at the more expensive side.

They got rid of the fee imo to attract those at the bottom of the barrel (forgive the phrasing) that would boost customer numbers from people unwilling to pay for services. it gets your numbers up but it does come with risk, you have customers who arenā€™t willing to pay and want everything from your for free.

The expansion into Europe with already established paid products might counter that a bit thereā€¦ well see.

Theyā€™ve already made a few things clear recently

they have no current ambition to go after small traders, those making lots of small worthless trades (from a cost perspective), freetrade can take those people up easily. the platform is free, and you can trade as much as you want for zero cost (even to the determent of freetrades cost)

  • Their customer numbers have gone up. While not as much as Freetrade, there not as the same stage as a company. currently 1.7 million active clients (not sure what they define as active, 30 days presumably like most). up 100k since last year i think.
  • Ā£141 billion under administration (doubled AUA in the last 5 years)

HL are still aiming at ā€œlife longā€ customers, as well as tying their focus to client services, and theyā€™re doubled down their focus on providing wealth management services. they talk about it here (159) Hargreaves Lansdown Capital Markets Day 2022 - YouTube

By comparison on the numbers Freetrade as of end of 2021 have 1 million registered users (they never mentioned active users this time around, unless someone has recent active user numbers?), and Ā£1 billion in AUA. Freetrade has massive growth in terms of number of new accounts. But it didnā€™t reduce HLs active accounts either. both increased.

I think the current factor in them both increasing their client base is partly due to people looking to invest a little more, and that their aiming at what i think are fundamentally different types of clients. not necessarily older and younger (HL in the video above did mention that their average client age has been going down), but the difference between long term, perhaps more ā€˜stableā€™ investing compared to getting your feet wet investors new to the scene or those wanting to trade frequently in smaller amounts.

All that is to say, theyā€™re both currently aiming at different types of customers, and freetrade imo isnt yet looking at long term high value life long cusotmers.

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I would love for Freetrade to ultimately compete for HLā€™s high value customers (FYI, I did transfer my SIPP from HL to Freetrade although Iā€™m not a ā€˜high value customerā€™ - mid 5-figure portfolio), but Freetrade appear to be going for a different market, particularly if they are intending to be offering cryptocurrency at some point in the future.

Not a direction I am particularly favourable of so Iā€™ll just see how things pan out. If Iā€™m not comfortable, transferring back to HL could be an option!

The label of a Fintech company weighs heavliy around Freetradeā€™s shoulders and they are constantly under pressure to make changes and bring out new features.

HL had the luxury of no such demands and had time on their side to develop their website - when I first applied for an account, I filled in a form and sent it to them with a cheque :laughing:

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I donā€™t think itā€™s as drastic but HL and a few others I think are on a similar position as banks. Neobanks I think pushed the big banks to invest in their apps, however the banks didnā€™t need to rush. They had the money and time on their side, they had no need to raise funds, I always thought that when the time came where the banks decided to push money into their apps it would be like a steam roller and I donā€™t think I was far off. NatWest for example have been pushing out feature after feature almost every month consistently for a while now and thereā€™s very little difference anymore between a new bank and an old bank.

The difference that does exist at least from current experience is customer service, say what you will, the big banks win hands down.

And I think this is a similar position HL is in. Their app is already pretty decent, and they have a website with a lot of features that freeteade just dont have anywhere, so theyā€™re already in some respects ahead of the game. When they want to ā€˜moderniseā€™ their apps, they already have the money and devs to do it, they just need to say ā€˜goā€™. And freeteade are going to struggle for some considerable time beating their customer service I think.

In some respects then itā€™s probably a good idea that freetrade isnā€™t going after the same customers, because Iā€™m not sure theyā€™d be able to compete right now

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We have not mentioned mid market Brokers like Jarvis/X-O and AJ Bell (regular AJ Bell, not Dodl).

I wonder what impact these have on HL?

Despite having Orca, a Broker that offer Ā£1 per trade on UK stocks and has nationality declaration stocks, it doesā€™nt yet offer Ā£QQ. So I signed up to X-O and found the UI to be very similar to Selftrade (Now EQi).

Suprisingly I seem to be at home with the UI, strange as that may seem

Priced at Ā£5.95/trade with no annual management fees.

At the moment FT and other low cost brokers wont impact HL greatly but X-O and AJ Bell (Original) might?

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Many of the neo brokers mentioned are white labeling IBRK or Drive wealth, as such their model is massively unsustainable. Itā€™s a land grab, scale at all cost & worry about profitability later. Like Uber you can build a business this way when capital is cheap but itā€™s getting more expensive and you can no longer raise at 50x-75x revenues just because youā€™re growing fast.

Watch this crowded space to get a whole lot thinner over the next 12-24 months.

And I notice there are a bucket load of apps that only have US stocks. Stake, Light-year and I heard of another. Oh thatā€™s it, Shares.

At least stake offers sharevoting.

With their FX fee to load or withdraw money and a certain degree of pedigree in that niche, they might be one of those that makes the cut.

The cost of white labeling and surviving on FX fees isnā€™t going to make a model sustainable. This is like Robinhood and forms a transactional relationship with your customers.

Freetrade have said all along they aim to build a long term relationship which is why they are pursuing a freemium model with monthly subscriptions.

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