Dear HL

Unlike many others in my sector, I’m a big fan of yours. I’m such a big fan that I’m a client – there, I’ve said it. And yes, I hold L&G and HSBC passive funds in my portfolio (such as it is).

I’m not daft enough to think that I’m getting something for nothing and I’ve had no problem paying the 0.5% HL charge on top of funds where you don’t get a rebate. I knew you didn’t put the 0.5% on the HSBC trackers as you were getting a rebate from them. That seemed pretty fair to me, especially as I also hold some other funds where I know HL will be picking up a 0.75% rebate or better.

(For those not so familiar, HL is both the adviser and platform, so gets the inbuilt 0.5% trail commission on a typical actively managed fund and a further rebate of 0.25% or so for having it on their platform.)

So I reckoned I was paying my way, sort of thing.

Frankly, the fact you were making extra bunce out of marketing packages et al wasn’t something I bothered about all that much. HL had the funds I wanted and that was fine. I knew I was probably overpaying a bit but I really like the experience (the iPhone app is excellent, by the way) and the service. I think it’s probably the best out there for self-directed folks like me. I’d rather be on an unbundled wrap, but not many of them are aimed at end investors – yet.

As you know better than me, the Vantage platform pretty much works on a basis points, er, basis (‘ad valorem’ if you’re posh). It doesn’t have a Skandia-style annual platform fee. Any structure that does this is chock-full of cross-subsidies and inefficiencies, but it’s simple to understand. That’s the trade-off. So I must admit to feeling a little like I’d stubbed my toe when I read about the £12/£24 pa charge replacing the 0.5% on some funds and being introduced on others that had had no charge. It had me rushing for (someone that knows how to use) Excel to find out if I was being horsed. It turns out my charges go up quite a bit. Heigh ho.

So now I know I’m paying more than 0.5% for having passives on Vantage. OK. It’s up to me to decide if that’s worthwhile or not. However, given that HL’s multi-layered revenue model doesn’t support passives all that well, one might decide that at least you’re giving it a bash and there is more to life than moving platform. And that app really is good.

But today, the redoubtable Gavin Lumsden broke the news on Citywire that apparently HL are double-dipping. That is to say you’re planning to keep taking a rebate from funds that you are saying need a £24pa charge because they pay no rebate at all.

I don’t mind paying a fully disclosed decent price for the service I get (which from HL has always been excellent). I do, however, mind companies gouging because they think they can. If – if – this report is true, I think you need to move your position. Trust is hard-earned, and this kind of thing can destroy it very quickly. It will with me; it will with others.

The answer? Recredit client accounts with the 10 or 15bps rebate you’re getting from HSBC et al. Keep the £24pa if you must (though I’d prefer a 0.50% annual charge), and make it really clear. Page 17 of Investment Times isn’t good enough.

Do this quickly. Do it visibly. HL is a great brand. Don’t throw it away.

Mark