Hargreaves Lansdown’s peculiarly engaging IGC report

Peculiar and engaging are not words I’d associate with this year’s crop of IGC reports which have struggled with the disadvantage of being published 10 months after the report’s analysis was done.

Hargreaves’ Chair Statement bucks this trend by being written as an extended letter from its Chair , Richard Butcher to the member. It finishes with an apology

It hasn’t been possible to look on a member-by- member basis. As a result, you may have a different experience of value for money compared to other members.

You can read the statement from this link; file:///C:/Users/henry/Downloads/igc-report-2022.pdf

I’ll be seeing Richard Butcher at the PLSA conference this week and hope to share with him the 79 individual VFM assessments we have done this year for Hargreaves Lansdown savers, they bear out the message that the IGC report has given, that members are highly engaged (relative to other groups of savers) and that they are by and large getting themselves value for money. We see a much lower usage of the default fund and savers we speak to are making high voluntary contributions, most of all , they are keen to find out how they are doing relative to other savers.

The tone of the report is very personal, it frequently uses “I” rather than “We” in statements of opinion. In previous reports – where I felt that the report was slapdash, I have been critical of this approach. Here, where analysis is more thorough and the reporting conscientious, this informal approach works well.  I give it a green for its tone and style.

Value for Money

The “peculiar engagement” of the report is most to the fore in the value for money statement. There is nothing particularly unusual about the conclusion

Our overall conclusion is that your workplace pension scheme and the Investment Pathways give most members value for money.
While the costs you pay aren’t the lowest available on the market, our assessment is that they are, in our view, reasonable
particularly when all the benefits provided to you are considered.

But the breakdown of the VFM analysis is quite new and purposeful

By reporting on the features of the Hargreaves Lansdown Vantage Plan in this way, each can be linked to a benefit if the “call to action” is followed. This is one of the best uses of a VFM assessment I have seen.

Like most other IGCs , Hargreaves Lansdown’s has used the Redington benchmarking service this year. Once again , the results are positive

we assessed the output of the Redington study
which reviewed the default funds and investment strategies
across the nine participating firms. Against this measure HL
funds performed well.

I am beginning to wonder what the methodology for this benchmarking study was, as everyone benchmarked well!

Within the parameters set by itself, this value for money assessment is fine, but does it really answer the questions of Hargreaves Lansdown’s engaged investors or disengaged savers? I suspect it will come across as lightweight.

I take as an example this statement

 the contribution you pay is the single most important decision you make about retirement saving.

This is misleading as contribution decisions are usually made on our behalf and so are investment decisions and it is the investment decision that is most important at retirement, especially for contributions made in the early years of our career. Consequently the internal rate of return achieved on your savings is the key determinant of the value brought by your provider.

A  more rigorous approach to examining data than that conducted is needed. I give the VFM an orange , it has great style but lacks a little in substance.

Is this IGC effective?

The annual IGC reports are our only opportunity to see inside the workings of the committee. By and large, the IGCs have this year been extremely good at telling us what they have been up to and what they intend to do next (this) year.

There is plenty of evidence in this report that the IGC has interacted with Hargreaves Lansdown and the report favorably reports these conversations. But there is little indication of challenge. I would like to see more engagement with Hargreaves Lansdown in many ways but chiefly in assessing how savers have fared relative to others. We were initially promised comparisons of delivered outcomes relative to the competition, sometimes , reading this report, I forgot that Hargreaves has significant competition. Perhaps the IGC next year might consider why the vast majority of employers do not choose the Hargreaves Lansdown way and establish whether this is for the benefit of Vantage Members (e.g. underwriting) or because there are other (maybe better) ways of providing a workplace pension. I will give the IGC an orange for their effectiveness.

Peculiar and engaging as this report is, there are aspects of it – that can be improved!

IGC Chair – Richard Butcher

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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