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The announcement by Hargreaves Lansdown that they have completely revamped their charging model is just the first salvo in a major shake-up of investment house remuneration structures. According to Citywire Money, Fidelity Personal Investing has already vowed to “undercut Hargreaves with a more transparent offering” and others are likely to follow suit.
The changes are being made in response to the regulator’s desire for fund supermarkets and brokers to price services more transparently and cease the practice of taking rebates from fund managers. These new ‘unbundled’ charges should make it easier for customers to compare investment platforms and choose the mix which suits them best.
At stake is the smaller investor market which has been largely cast adrift by the banks as well as the wealthier customer base which tends to be able to choose between specialist advisors and self-investment. But with the market in flux, charges alone may not be enough to determine the eventual winners and losers. Those who can offer competitive charges alongside an outstanding level of customer service are likely to be the eventual winners.
This means gearing up for fast response times, simple processes which don’t involve the customer in oceans of paperwork and a ‘can do’ attitude. This ‘customer comes first’ attitude is something which has not always been in evidence in the investment industry in recent years and tales abound of slow turnaround times, lost paperwork and endless bureaucracy.
Unbundled charging is just one of the regulator’s aims, sitting alongside goals such as moving to a “more mature age where investor interests are front and centre of firm business models in the global markets.” So, new charges yes, but also new cultures where customer comes before profit and process are not just designed with the company in mind.