Hargreaves Lansdown, one of the UK’s largest brokers and direct-to-consumer investing platforms, has removed fees for investors who invest regularly via direct debit and reinvest their dividend payments.
Reducing direct debit and dividend reinvestment fees
As of Tuesday, April 11th customers who invest regularly via direct debit payments to Hargreaves Lansdown, will no longer be subject to the £1.50 charge that was previously collected by the firm.
The new reduction in fees applies to both buy and sell transactions in stocks, Investment Trusts, and ETFs. Regular investment into mutual funds was already exempt from the charge.
Hargreaves Lansdown will also remove charges associated with the reinvestment of dividends into stocks, something that currently has a 1.0% fee, with a minimum charge of £1.00 and a maximum of £10.00.
The reinvestment of dividends can be one of the major drivers of long-term compounding effects, within an equity portfolio over the long term.
And in the right circumstances, the strategy can boost returns substantially.
Hargreaves Lansdown has traditionally been an expensive investment platform
These fee reductions are the latest in a series of moves by Hargreaves Lansdown to make its offering more competitive. The firm recently removed charges on its Junior ISA and slashed the fees on its Life Time ISA from 0.45% to 0.25%.
Rival platform Interactive Investor introduced its Investor Essentials platform in February, the new service allows inventors with £30,000 or more to invest for a monthly flat fee of just £4.99. It runs in parallel to Interactive Investor’s general investment account, which charges user £9.99 per month.
Much of which is rebated via a monthly commission-free trade.
The other major investment platform, AJ Bell, charges a management fee of 0.25% per annum, however, that falls to just 0.1% if you have £250,000 or more in your portfolio.
Hargreaves Lansdown currently charges a 0.45% management fee to fund investors with a portfolio of up to £250,000, the fee falls to 0.25% per annum if you have £1,000,000 or more invested with the firm.
Increasing competition to reduce investment account fees is only to be expected, as for the most part, the platform providers are effectively resellers of other people’s products, who compete with each on user experience, customer service, commission charges and admin fees.
Lower charges are positive for investors and savers, however, there would be few winners if any from an outright race to the bottom on charges.
The big brands are keen to grow the value of assets under their administration, but I believe that innovation and differentiation are like to prove more fruitful in the long term, in comparison to continued cost-cutting.
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