Hargreaves Lansdown PLC Announces RDR Pricing Changes

Shares in Hargreaves Lansdown (LSE: HL) slipped by around 4% in early trade this morning, following an update on the Retail Distribution Review pricing.

The fall comes as the financial services company estimated that it will have to invest at least £8m in lower client charges in the first 12 months, while management also warned that a further cost of £9m may be inflicted as the industry approaches “the RDR ‘Sunset Rules’ in April 2016, related to remaining transitional commission arrangements that will drop away”.

The new RDR pricing announcement has caused changes to Hargreaves’ client charges, including a tiered fee on fund investments. These break down to: 0.45% p.a. for funds up to £250,000; 0.25% p.a. for funds from £250,000 to £1m; 0.1% p.a. for funds from £1m to £2m; and no charge for funds upwards of £2m.

However, overall Hargreaves Lansdown has reduced charges through its Vantage service, with the average customer now set to pay 1.1% in charges from 1 March instead of the 1.33% average under the previous model.

Chief executive officer Ian Gorham commented:

“We are pleased to announce that we have negotiated new lower cost funds for our clients; changed our pricing structure to the benefit of the majority of our clients and further improved the already excellent service that we provide.

“In 2011 we reduced charges for holding and dealing in shares by £9 million when we launched our new low-cost stockbroking service. In 2012 we spent £7m introducing loyalty bonuses in the Vantage SIPP. We are now reducing the cost of investing in funds, saving our clients an estimated £8 million per annum. As a result, most clients will be paying even less when investing through Hargreaves Lansdown.”

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> Sam does not own shares in Hargreaves Lansdown.