Hargreaves vows to 'fight hard' over FSA platform rules as profits jump 41%

I understood the RDR paper was focussing on price transparency but Peter Hargreaves talks as if it is about price controls and margin erosion (for him). Given that HL currently receives about a 52% revenue share from fund managers' AMC that has a certain irony. But what exactly is Peter's problem with transparency? All he will be doing is exposing to the whole fund provider community what their individual pricing 'negotiations' with HL actually are. That might be excruciatingly funny in some CIty offices and raise an eyebrow or two at the FSA if it appeared that there was ANY correlation between rebate levels and funds being promoted.

At the customer 'coal face' there might also be pressure for HL to justify why a record-keeping and admin platform (Vantage) needs 52% of AMC revenue to keep going - unless of course, it is to post 41% increases in profits each year.

We live in interesting times...

Even today, Regulators do not understand the markets they have been appointed to regulate. Way back then, when the Financial Services Act was drafted in 1986 and then implemented on "April Fools Day" 1988, IFA practitioners had a better knowledge of the rules and how they should be interpreted. This led to numerous discussions and arguments between market users and Regulators which usually ended up with "you cannot critices Regulators."

Looking at Peter Hargreaves record these last few years, it is safe to assume that "he knows best" and should receive as much support from the rest of the Industry as is warranted.

HL are saying they will fight certain aspects of the regulators moves on platforms - and it seems Peter Hargreaves is today stating that firms such as his, that offer volume to their suppliers, ie fund houses, should be able to buy cheaper - which is surely nothing more than commercial fact, common sense and the way the world works. But I see no reason why HL should feel they can't be transparent, as this is the key aim of the financial services industry, at least from the top down, ie government and regulator.

Presumably HL feel that such transparency will be commercially harmful, which is conceivably possible - if they have negotiated more successfully with fund houses than other platforms have, ie Fidelity : and it would appear likely that they will (and possibly should) have done (given that it is surprising Fidelity hadn't 'done better' in applying commercial pressure to achieve better than a 'standard' 25bps amc 'share' on 18 of the 20 funds they have now disclosed on, with higher share only on the higher/highest amc charging funds).

I think the disclosure move is a good move by Fidelity. Whether the others, ie Cofunds, Skandia, etc, follow suit will be interesting … and whether HL choose to or eventually have to : I suspect that this was at least part of the thought process at Fidelity.

Aside from the lead in providing transparency that Fidelity have gained, I also think they have shown that they have operated with a level playing field in the relationships and terms they have with the suppliers/fund houses, which is a distinct positive. It is possible that aside from fears over displaying superior commercial tactical success with fund providers HL might also be worried that following such transparency will expose that they have operated with a less than level playing field in the terms that they have negotiated … and possible links between this and the funds that they promote.

As yet we don’t really know the fundamental reasons for HL’s reluctance to embrace transparency. But their model and business is exceptional and I empathise with their position, in terms of wishing to protect the commercial advantages and market position that their skill and talent has created over the last 20 years. However, they are up against a top down, regulator driven, drive for transparency that I think will see them have to relent. I suspect that their client base will be happy enough with the terms and service that they receive not to begrudge the firm its piece of the cake. In fact I think their client base probably enjoys and applauds the firms' success story (from bedroom to FTSE 100 Index in 25 years, etc) and its value proposition.

As a customer of HL I want to see exactly what fees investment houses pay HL. I am also going to remove my business from HL. FSA please resist HL pressure.