You will have read the stories. The ones with headlines like: ‘Beware hidden charges’. The ones about pension providers, investment companies and wealth managers who charge customers hundreds of millions of pounds every year in ‘stealth fees’.
At worst, the charges can be 2.5 per cent a year. So if you have a healthy – but not unusually so – pension pot of £100,000 that’s £2,500 every year. Not an inconsiderable amount of money.
So imagine my surprise when I realised that Hargreaves Lansdown, the company I had used to buy some shares, had charged me what in effect amounted to a 15 per cent commission.
Warning: Hargreaves Lansdown’s terms were buried in the fine print
Its excuse? The oldest – in this case highly questionable – one in the book: ‘Sorry, it’s in the terms and conditions. Didn’t you know?’
I bought the shares – £1,000 worth – in late 2018 and was charged a not unreasonable £20 commission, clearly shown on the contract note that I was sent afterwards.
But when I came to sell the shares recently I got a nasty shock. What surprised me wasn’t that they were now worth £470 – I’d been following their downward progress online – but that I had accrued £72 in ‘fees’. A £72 charge on a sale of £470 represents a commission of nearly 16 per cent.
Or, to put it more accurately, a charge for unwanted paper statements which many customers are totally unaware of, which cost Hargreaves Lansdown very little to produce, but which make them huge amounts of money every year.
What made me angry was that I only found out about the charge when I sold the shares. By then it was too late.
I protested to the company during a 45-minute phone call. My gist was: ‘You’ve been sending me paper statements showing what the shares are worth. But nowhere on them do you tell me I’m paying for the privilege. That’s sneaky and misleading.’
No, it responded, the charges were in the terms and conditions referred to in the contract note when I bought the shares.
I checked. It was right. There, at the bottom of the page in almost unreadable small print, it said: ‘This contract is subject to our normal terms and conditions.’
‘Hold on,’ I said. ‘Why didn’t it say: ‘You will now be sent paper statements and six-page market reports and will be charged for them.
And why didn’t you tell me on the phone, when I bought the shares, that I was opting in to an expensive service I didn’t want? Wouldn’t that have been fairer?’ ‘It’s in the terms and conditions,’ came back the answer.’ ‘Yes, but I never got them.’ I retorted. Its response? ‘They’re online.’
Eventually, Hargreaves Lansdown sent me the terms and conditions. A mountain of verbiage running to 20,000 words – the length of a short novel – which had me reaching for a magnifying glass and thesaurus. Sure enough, right at the end, came the stuff about fees.
Hargreaves Lansdown pointed out that the six-page, largely proforma ‘market reports’ I’d also been getting through the post mentioned the existence of the fees.
But because I’d never asked for these reports in the first place they went straight in the bin. It was just junk mail, I reasoned. And who gets charged for receiving junk mail?
Out of curiosity I asked Hargreaves Lansdown to resend me one of these market reports so I could check the wording.
This is what it said: ‘If you currently pay the paper service fee of £10 plus VAT, collected twice a year, you can save money by registering for our paperless service, as then this charge will no longer apply. See how to get started on the next page.’
Note the wording. It doesn’t say unambiguously: ‘You are being charged for this report every time you get it. If you want the charges to stop call this number.’
What is worrying is that some investors will have shares which they think are worth, say, £300, but will end up being valueless.
It’s entirely possible, if they’ve held them long enough, that the cumulative charges will wipe out the value of their shares. Even more worrying is that Hargreaves Lansdown may well have broken the law.
Official Government advice on unfair contract terms states: ‘Consumers should always have a real opportunity to be acquainted with, and understand, contract terms before being bound by them.
‘If a term requires them to accept wording of which they have no prior knowledge it could be challenged as unfair.’
Hargreaves Lansdown is now launching an inquiry to see if it has indeed broken the law – thanks to the intervention of The Mail on Sunday.
But how rigorous will it be, given that Hargreaves Lansdown will be the judge and jury in its own courtroom? Only time will tell.
In the meantime, my advice is simple. If you’re a Hargreaves Lansdown client and receiving paper statements, wake up. It’s costing you. Big time.
My advice to Hargreaves Lansdown? Even simpler. If you want to keep your 1.3million customers’ trust and respect, you need to change your ways. Fast.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.