Hargreaves Lansdown will take care of your ISA- so long as you never die
Over the past few months, investment houses and fund shops have come under scrutiny over new and ‘improved’ fees and charges information. While these charges might seem small at the time (if you even see them), the power of compound growth means they can have a huge impact on the size of your investment at the time you come to draw on it.
The UK’s largest fund supermarket, Hargreaves Lansdown, was criticised for high charges earlier in the year, which resulted in some of those charges being reduced owing to market pressures. Now, it seems, there is another sneaky charge, which will get all of us in the end.
When someone dies, their executor has to collect together information on all of their assets to ascertain whether inheritance tax is due, and to whom the asset will pass. If someone dies holding an ISA, then the executor needs to request the relevant information from the ISA provider.
Now Hargreaves Lansdown is under fire again for levying noticeably higher charges for these probate valuations that anyone else. Under their pricing structure, when an investor dies, Hargreaves also charges £36 per fund including VAT for a probate valuation with a minimum £120 and a maximum £600. So if someone held ten funds in their portfolio, the charge would be £360, paying the full whack on 17 funds plus.
But it doesn’t have to cost that much. Charles Stanley Direct makes no charge for a probate valuation, though it will charge £5 if you want it posted. Bestinvest and TD Direct Investing each charge £12 per fund, putting them in the mid-range, and three times cheaper than Hargreaves Lansdown.
The Share Centre charges £50 to administer the affairs of a deceased customer, no matter how many funds or accounts they hold and large fund supermarkets Fidelity Personal Investing and Barclays Stockbrokers do not charge for probate valuations.
Danny Cox, of Hargreaves Lansdown, told This is Money: “The charge for the probate valuation includes the administration of the account. Until recently we did not charge for probate valuations and the administration of an estate.
“Our new pricing aims to be proportionate and charge those clients fairly for the services they use. The process of administering a deceased client’s holdings is labour-intensive and our charges reflect this.”
Hargreaves Lansdown also highlights its customer service and the efficiency of its systems. Given its size and efficiency, therefore, some groups are questioning why on earth Hargreaves Lansdown need to charge so much more than competitors-
“It is one thing to make a small administration charge, another to make a profit. Why would it cost Hargreaves three times more to administer probate than it costs other companies?” said James Daley of Fairer Finance, a website that aims to get a better deal for consumers.
He went on to describe Hargreaves Lansdown as “heartless and crass” for “making money out of bereaved people”, finishing that “as the market leader and a FTSE 100 company, you would expect them to set an example.”
Yes, an example of how to make 66p profit per £1 of income. Even out of dead people.