Thanks to Robin Powell for bringing this to my attention and thanks to Sally Hickey for researching and writing the article for the FT
Here is the damning evidence uncovered by Hickey
Hargreaves Lansdown has said its funds represent value despite the majority underperforming on a three and five year basis.
In an assessment of value report published this week, Hargreaves Lansdown said all of its 14 funds represent value to their clients, with five of these requiring “continued focus”.
This is despite 10 of these 14 funds underperforming their sector on a three-year basis and nine funds underperforming on a five-year basis.
Those familiar with the way we consider past performance will be aware that past performance is not a guide to the future, so why bother with past performance at all?
It is a comforting thought for any fund manager, heads you win and you publish you are a winner, tails you lose and you lose your performance history and start again next year. Every dog will have its day – you may get lucky next year, just hold on and assess your value in terms of your passionate belief that next year will be yours!
Addressing the issue that the range of funds that Hargreaves Lansdown manage (effectively funds of fund manager’s funds) Chair of Hargreaves Lansdown, John Misselbrook, acknowledged that the investment performance across the multi-manager fund range needs further improvement.
“In our five-year performance assessment model we have lost a good year of investment performance, and performance in the current year has been mixed.”
Misselbrook added that steps have been made to improve the funds’ investment performance in the past year, including expanding the number of investment professionals and fee reductions to some of the multi-manager funds.
So the consumer is getting better value for money because Hargreaves Lansdown are employing more managers and reducing its fees.
All of its multi-manager funds have seen fee reductions of at least 0.01 percentage points over the past year.
Value is not about your business model or your margins
Too many people in the funds, platforms and pensions business see “value” as something they can award their savers/investors, with reference to the business model.
St James’s Place use this chart to show that their advisory model is offering better value than their peers.
St James Place, argue that value is assessed by the testament of its clients who consider they get good value for money for their experience. In terms of the recent tests suggested by the DWP, SJP would probably get a green for the value of its service quality.
Hargreaves Lansdown is shown at the extreme left of the chart, as a non-advisory product.
And- as stated by EY, the Hargreaves Lansdown funds are not being assessed for the quality of service of Hargreaves Landsown’s advisory service but as part of its “Value Assessment of its fund offerings.
To my memory, those who argued that when marking their own homework, managers of funds were able to think of their work as “value assessments” so that they could focus on “outcomes not fees“.
In its value assessment report, Hargreaves Lansdown argue that it believes the underlying fund charges, which range from 1.46 per cent to 1.3 per cent for the multi-manager range, are “reasonable” for actively managed funds.
It’s surprising Hargreaves Lansdown think “reasonable fees” can justify poor outcomes.
There is no other measure for value than “value given” – “value promised” is for the birds.
Hargreaves Lansdown’s own funds are currently offering poor value for its investor’s money. It’s Value Assessment should say so. The FCA should look at this.
I think ‘value for money’ needs to be defined before drawing any conclusions. As far as I could tell, and I could easily be wrong, there was no attempt to define the concept here. There may be an implicit assumption in the mind of the researchers as to what constitutes value for money, but of course no rigorous analysis would adopt that approach.
The 3 tests define the value we get for our money. Performance, cost- service- benchmarked against certified thresholds.
No mention of risk?