Hargreaves Lansdown new charges: here’s how AJ Bell compares

Hargreaves Lansdown (HL) has made its first change to pricing in more than a decade, with fee cuts for a number of customers but increases to costs for many others.

While HL customers will benefit from a cut to the headline platform charge from 0.45% to 0.35%, other customers will find themselves paying a lot more in fees, thanks to certain fee caps being removed. Despite the platform fee cut, AJ Bell fees remain lower in most cases, meaning AJ Bell customers will continue to save money on their investments – which will add up over time.

Let’s look at the HL fee changes and how they stack up against AJ Bell charges for different customers, and how even a small reduction in fees can boost your investment portfolio over time.

What HL fee changes have been made?

Annual charges

The headline annual charge for HL’s ISAs, Self-invested personal pensions (SIPPs) and Dealing accounts (HL’s equivalent is called the Fund and Share account) has been cut, meaning core HL fees are 0.35% a year from 1 March this year, compared to 0.45% at the moment. AJ Bell’s equivalent charge is 0.25% - which means HL’s fees are 40% higher than AJ Bell.

The amount you actually pay with HL’s new charges depends on the value of your investments and whether you invest in funds or shares (which includes ETFs, investment trusts and bonds).

If you invest in funds, there is a tiered structure where you pay 0.35% on the first £250,000 invested, and 0.25% on the next £750,000, before the charge drops to 0.1% for account values of £1m to £2m. After £2m you pay no annual charge on that portion of your investments.  

If you invest in shares the 0.35% charge applies, but there is a cap and this is where many customers will see their HL fees rise. For ISAs, the cap is currently £45 a year, and this is increasing to £150.  

For Dealing accounts (or Fund and Share accounts as HL calls them), there is currently no HL fee, but this will increase to 0.35% a year under the HL new charges and the same £150 a year cap will apply.  

Dealing charges

The amount HL customers pay to trade in shares has been cut from £11.95 to £6.95 per online trade, while a new charge will be introduced for buying or selling funds online for £1.95 - where currently it’s free. If HL customers invest in certain shares, investment trusts, or ETFs through regular investing, there is no charge for buying.  

FX dealing fees

People who invest in overseas shares pay Foreign Exchange (or FX) fees for doing so. These are also changing with Hargreaves’ new charges. The charges work in a tiered structure, and currently investors pay 1% on trades worth up to £5,000, 0.75% on the next £5,000, 0.5% on the next £10,000 (i.e. trades between £10,000 and £20,000) and 0.25% for the portion of any trade over £20,000.  

The new HL fees will mean there is a 0.99% charge for the first £10,000 of a trade, dropping to 0.5% for the next £15,000, before hitting 0.2% for the value over £25,000. In practice this means a higher FX charge for anyone making a trade between £5,000 and £75,000. For example, someone buying overseas shares worth £10,000 will pay £11.50 more in FX fees under the new HL charges, while someone buying £25,000 of shares will pay £24 more in fees.  

Is AJ Bell cheaper than HL?

Let’s compare AJ Bell to Hargreaves Lansdown on charges. Despite the fee cuts for a number of Hargreaves Lansdown customers, AJ Bell is cheaper in many cases for ISA, SIPP and Dealing account charges. Where the HL new charges for account fees will be 0.35% a year, at AJ Bell the equivalent charge is 0.25%.  

As with Hargreaves, if you hold funds with AJ Bell these account fees are tiered. With AJ Bell the fee scales down once you have over £250,000 invested, dropping to 0.1% for the next £250,000 to £500,000, falling to no charge for the value over £500,000.  

If you hold shares, for ISA and Dealing account customers this charge is capped at £3.50 a month, or £42 a year, at AJ Bell, compared to the £150 cap from HL’s new charges.  

For SIPP customers with AJ Bell the monthly charges cap if you invest in shares is £10 a month, or £120 a year – compared to the £150 cap for HL customers.  

When it comes to buying and selling investments, AJ Bell remains cheaper. For buying or selling shares, the cost is £5 per trade with AJ Bell, compared to the new £6.95 cost from HL charges. With fund dealing, the charge with AJ Bell is £1.50 compared to £1.95 for HL. While currently AJ Bell customers pay £1.50 for the regular investment service (whether in funds or shares), this will be free from May.

When it comes to FX costs AJ Bell also operates a tiered structure, but with lower costs for many. For the first £10,000 of an international trade customers will pay 0.75% with AJ Bell, dropping to 0.5% for the next £10,000 and then to 0.25% for the value over £20,000. 

See AJ Bell’s full charges information.

What does this mean in practice? 

Clearly fees vary per person depending on which type of account they have, what type of investments they hold, and how often they trade. So, let’s look at some examples to see how HL’s new charges compare for different customers, according to Boring Money figures.  

Someone with £20,000 in an ISA, who trades funds twice a year: This individual would pay £90 a year under the current Hargreaves charging structure, and this will drop to £74 from March. However, with AJ Bell this fee would be £53 a year. 

Someone with a £100,000 portfolio in funds who makes six fund trades a year: Currently this person will be paying £450 a year in fees with Hargreaves, and that will reduce to £362 a year from March. With AJ Bell, the annual cost is £259 a year for this investor.  

Separately if we look at just FX fees, with the new HL charges, someone buying £10,000 of overseas shares will pay £24 more with Hargreaves than if they were with AJ Bell, while a trade worth £30,000 will see them pay £21.50 more.  

How much could lower fees save you over time? 

You might think a small reduction in fees doesn’t make a huge difference – and looking at just one year of cost savings it might not seem like a big difference. But just as the magic of compounding boosts your investments over the years, so too does the compounding effect of saving on fees each year.  

Let’s look at the example of someone with £50,000 in their account, invested in funds, earning investment returns of 5% a year. If they have annual account charges of 0.35% a year then after 10 years, assuming no further contributions to their account, they’d have £78,770 in their account. If that same account fee was lower at 0.25% a year, they’d have £79,526 in their account - £756 more. The effect is more amplified over time, as after 20 years the difference in fees rises to £1,427.  

Let’s look at someone who has £200,000 invested but this time in shares (we’ll assume the same 5% annual investment growth and no further contributions as above). It means that with both AJ Bell and Hargreaves Lansdown charges they would hit the charge cap - £150 a year for HL and £42 a year for AJ Bell. After 10 years this difference in fee cap would equate to a £1,358 difference in the total investment pot. And after 20 years this rises to £2,330.  

Is price the only factor? 

Put simply, no. The adage of you get what you pay for is sometimes true. Rather than just opting for the cheapest provider, you need to make sure you’re getting all the features and services you need too. 

You could opt for the cheapest option and then discover it doesn’t offer the range of investment options you need, doesn’t have tax-efficient accounts, or doesn’t have the level of customer support you need. 

But you should hunt around for the best deal that gives everything you need from your investment platform. It’s a good idea to look at the charging structure for your portfolio size and types of investments – but also factor in some growth in your portfolio over time. Equally, looking at things like independent review sites, such as TrustPilot or Which? ratings, can help to weigh up the different options.