Fidelity Undercuts Hargreaves Lansdown on Client Fees

Fidelity Worldwide Investment said it plans to announce a fee structure for retail clients that will undercut competitors including Hargreaves Lansdown Plc (HL/), the U.K.’s largest retail broker.

Fidelity will publish the fees next week to be implemented by March 1, Mark Till, head of personal investing, said in a telephone interview in London today. Hargreaves Lansdown unveiled its tiered-fee structure today, reducing costs for client investment as part of a second phase of U.K. regulations introduced last year.

“Our new fee structure will be cheaper for the majority of investors based on what we have seen,” Till said.

Firms including Fidelity and Hargreaves are introducing fees on their investment platforms, which enable consumers to invest directly in funds, to replace commission income and comply with the U.K.’s Retail Distribution Review. The rules banned financial advisers from taking commissions from fund providers in its first step.

Hargreaves’s new structure charges its clients a 0.45 percent fee on the first 250,000 pounds ($408,375) of a fund, 0.25 percent for the next 750,000 pounds and 0.1 percent for values over 1 million pounds to 2 million pounds, according to a statement.

The U.K. broker also negotiated with fund managers to cut their annual management charges for its top 150 funds to about 0.65 percent, which compares with an industry standard of 0.76 percent, the company said. It has also struck deals with BlackRock Inc. (BLK), the world’s largest asset manager and Legal & General Group Plc (LGEN) to gives its clients access to “super low-cost passive funds.”

Industry Consolidation

Andrew Power, insurance partner at Deloitte LP in London, said fees from investment platforms will continue to fall, driving industry consolidation. There are more than 30 investment platforms in the U.K, he said.

“One consequence of greater transparency of charges to consumers is that platforms’ fees will continue to be squeezed,” Power said in e-mailed comments. “Unless a platform is willing to run at a loss, the market is likely to consolidate over the next two to three years down to about 10 large-scale providers and a small handful of niche providers.”

Hargreaves lost as much as 5.4 percent to 1,427 pence in London trading, the biggest intraday decline since Sept. 4, as the company said the fee changes will cost the broker 8 million pounds ($13.1 million) in the first 12 months and 9 million pounds after April 2016. The broker said it will need to gather 3.5 billion pounds of new assets in the next three years to offset the lost revenue.

Barclays Stockbrokers is due to announce its new pricing later this month. Darius McDermott, managing director at Chelsea Financial Services in London, said he expects to announce his firm’s changes at the end of February.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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