Hargreaves plans to cut Wealth 150 list to 30 funds

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Hargreaves Lansdown is planning to cut its Wealth 150 list down to as few as 30 funds as it looks to adapt to the new pricing world post-RDR.

Investment Week can reveal Hargreaves has contacted fund groups asking them to prepare to compete for spaces on a shorter version of the well-known list.

Fund providers will need to submit private offers detailing what price they will give Hargreaves on super clean share classes for their leading funds.

Successful funds will form part of a core list of offerings Hargreaves markets to clients.

Currently there are 103 funds on the famous list, which was launched a decade ago. The number has shrunk in recent years due to a lack of consistently performing active funds and some soft-closures.

The plan from Hargreaves - headed by chief executive Ian Gorham (pictured) - has been created ahead of the publication of the final rules on platforms from the regulator, expected tomorrow.

It hinges on the paper remaining virtually unchanged from previous versions. Sources close to the regulator said they are not expecting any sweeping changes.

Hargreaves, like many peers in the platform space, needs to adapt its business model as a result of the RDR and the removal of commission.

Currently, Hargreaves takes around 81bps in total from bundled 1.5% AMC share classes sold on its platform, as there is no adviser to take trail commission.

It then passes an average of 17bps back to the client in the form of a loyalty bonus.

The model has been hugely successful, helping to lift the company into the FTSE 100 two years ago, and revenues and profits have continued to soar.

Since the RDR has removed commission, the platform is now likely to have to charge clients directly. However, if it gets preferential pricing on super clean share classes, it can still attempt to undercut competitors and offer clients the lowest possible price, even with its own fee added on top.

By creating a focused Wealth 30, for example, inflows would be concentrated among fewer products Hargreaves recommends to its clients. This could provide the incentive for fund providers to accept a squeeze on their pricing.

Gorham said: "As we have always done, we will use our buying power to negotiate the best deals we can for clients. As commission free funds are becoming available, we will negotiate on these too. The policy of seeking the best deal we can for clients will apply to all funds on the Vantage platform, including those which appear on the Wealth 150."

Gorham said the process will take time, and Hargreaves will not make any changes to the Wealth 150 until it receives offers from fund managers.

He added: "Charges do affect performance, so if charges are different in the new world then, as you would expect, we will take that into account in assessing investments. Charges are considered alongside performance potential and other aspects of investment research."

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