Hargreaves Lansdown, one of the UK’s leading investment specialists, has moved its advisory service into a restricted advice model in what it looks like a move designed to turn its back to structured products.
Hargreaves is an independent adviser and so obliged to research investments that clients rarely hold and it thinks are either overly complicated, opaque, expensive or carry excessive investor risk, for example, complex structured investment products, said the company in a statement. By restricting the advisory service it offers, and concentrating its advisory research and resources on areas that matter to its clients, the company will be able to improve its advisory services, simplify its fee tariff and remove the minimum portfolio size for advice, said the statement.
Investors will see very little change as the firm will continue to offer portfolio management, investment and pension advice, retirement planning and inheritance tax mitigation, said the company.
However, for an adviser the size of Hargreaves to drop the "independent" tag to avoid the need to research structured investments is an “utterly ridiculous statement” that undermines the work of the regulator and the UK Financial Conduct Authority’s Retail Distribution Review (RDR) guidelines as it sends the wrong message to the market, said a London-based senior structured products banker.
“The ‘independent’ tag was seen, post-RDR, as something every serious adviser should aim at to address commission bias and other things,” said the banker. “This decision strikes me as very sad, because this is to the detriment of the end consumer. We all know that there are some poor structured investments out there but the same applies to open-ended funds, investment trusts.”
To maintain independent status, the company had to be able to research and recommend complex and expensive product types, even if we do not believe in these products or, there is no demand for them, said Hargreaves. The company said that it does not have to provide the systems, processes, research and controls in place to advise clients on complex and expensive product types it does not believe in and that its clients don’t want or need.
“The problem with structured investments for Hargreaves is that they’d never paid trail commissions and they have no place on their platform,” said the banker. “ Hargreaves can hide behind words like ‘opaque’, ‘transparency’ and ‘complexity’, but quite frankly some of the products sitting on its platform are riddled with opacity… not to mention other issues such as charges, PPI, etc.”
Hargreaves announced that, as of today its advisory fee tariff has been simplified and capped.
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