Hargreaves Lansdown has joined the ranks of those offering investors a rebate on trail commission. ...
Hargreaves Lansdown has joined the ranks of those offering investors a rebate on trail commission.
When discount brokers Chartwell and Commshare first offered a half rebate on trail commission, Peter Hargreaves, managing director at Hargreaves Lansdown, initially said both companies were reaping the rewards of other groups' direct mail campaigns.
He said: "My biggest concern is that the industry continues to reward the same for unequal effort. A firm with huge resources and after-care services gets the same commission as a back street broker. This could result in the erosion of the viability of the investment research and market creation activities of bigger brokers."
Hargreaves Lansdown is now offering a rebate on all up-front charges and half the 0.5% trail commission through its HL Vantage Isa.
The decision has come primarily in response to a loss in market share to lesser companies, said Ben Yearsley, investment manager at Hargreaves Lansdown.
Chartwell and Commshare have attracted investors on the back of their offer but clients are still returning to Hargreaves for an after-care service and advice, Yearsley added.
Martyn Laverick, director at Chartwell, said the loss in market share reflects how people value the commission. He added: "Investors have voted with their feet and Hargreaves has had to react to market pressure. We believe this is a sign of things to come in the IFA market."
Since Chartwell and Commshare began their rebate offer, Hargreaves Lansdown has tried to alert fund managers to its concerns.
However, Laverick believes it is not up to the product providers to dictate the business strategies of IFA firms. He said: "Most of our discussions have been with Fidelity and a number of larger investment groups which want to keep the status quo. IFA companies are independent businesses and we stick by the view that we can run our business as we deem correct."
Yearsley said: "Looking at Chartwell and Commshare, there is no physical way they can realise their promises. The various ways in which clients will send in their information means it is virtually impossible to keep track of all the repayments to be made. If we offer the rebate on trail commission within the Vantage Isa, we can control our client data by simply adding to the existing software."
Laverick agreed that there is a tremendous amount of hard work involved, but believes the company can cope with the administration.