Hargreaves Lansdown (HL) is one of the UK’s leading investment platforms, offering a broad range of financial services, including ISAs, SIPPs (Self-Invested Personal Pensions), funds, shares, ETFs, and bonds. The platform is praised for its ease of use, extensive educational resources, and excellent customer service. However, for cost-conscious investors and those seeking advanced features, such as comprehensive tax reporting or competitive international trading options, HL has several notable drawbacks.
High Share Dealing Charges
Hargreaves Lansdown’s share dealing charges are relatively high. The platform operates on a tiered fee structure:
- £11.95 per trade for 0–9 trades per month.
- £8.95 per trade for 10–19 trades per month.
- £5.95 per trade for 20+ trades per month.
While frequent traders benefit from reduced fees, occasional investors face substantial costs compared to platforms offering flat or commission-free trades. For instance, five trades in a month would cost £59.75 in fees, which can significantly impact returns on smaller investments.
Dealing in US and International Shares
Hargreaves Lansdown provides access to US and other international shares, but the associated costs are substantial:
- Dealing Charges: The same tiered structure applies as for UK shares, with fees starting at £11.95 per trade.
- Foreign Exchange (FX) Fees: When trading in non-GBP currencies, HL charges an FX fee:
- 1% for trades up to £5,000.
- Reducing to 0.25% for trades above £500,000.
For example, trading £10,000 worth of US shares incurs an FX fee of 0.75% (£75), in addition to the share dealing charge.
- Holding International Shares: Dividends in foreign currencies are converted to GBP, incurring the FX fee.
- Tax Considerations: While HL assists with submitting the W-8BEN form to reduce US dividend withholding tax, investors must handle their own capital gains tax reporting for international trades.
Fees for Bond Investments
A significant downside of Hargreaves Lansdown is the annual fee for holding bonds. The platform charges 0.45% per year, capped at £45 for ISAs and general investment accounts but uncapped for SIPPs.
For example:
- Holding £10,000 in bonds within an ISA incurs a £45 annual fee.
- In a SIPP, a £50,000 bond portfolio incurs a £225 annual fee, as the charge is uncapped.
This fee structure can make HL a costly option for bond investors, particularly those managing larger portfolios.
Lack of CFDs and Other Advanced Instruments
Hargreaves Lansdown does not offer contracts for difference (CFDs) or other leveraged products such as options. This limits its appeal to more advanced traders or those seeking speculative investment opportunities. Investors looking to trade CFDs may need to explore alternative platforms like IG or CMC Markets.
Lack of Comprehensive Tax Reporting
One significant limitation is the inability to generate a complete profit-and-loss statement for the year. This creates challenges for investors required to compute capital gains tax (CGT). Many competitors offer automated CGT calculators or downloadable reports, making HL less appealing for active traders or those with complex portfolios.
Other Considerations
- User Experience: HL’s platform is intuitive, making it accessible for beginners.
- Customer Support: The company is known for its excellent customer service, available via phone or email.
- Range of Investments: While HL provides access to a wide array of investments, the absence of CFDs or advanced trading tools is a limitation.
Who Should Use Hargreaves Lansdown?
Hargreaves Lansdown is well-suited for investors who value convenience, a broad selection of investment options, and strong customer support. However, its high costs, lack of CFDs, and limited tax reporting tools make it less ideal for cost-conscious investors or active traders.
Recommendations
- For Beginners: HL is an excellent starting point, but costs should be carefully considered.
- For Active Traders: High fees and limited product offerings may make alternatives like IG or Interactive Brokers more attractive.
- For Bond Investors: Those holding significant bond portfolios should compare HL’s fees with competitors offering lower or flat-rate charges.
- For International Traders: While HL provides access to US and other international shares, the high FX fees may lead frequent traders to explore alternative platforms.
Final Verdict
Hargreaves Lansdown is a reputable platform with strong customer service and a wide range of investment options. However, its high costs, lack of CFDs, and limited tax reporting tools are significant drawbacks. Potential users should compare HL with other platforms to ensure it meets their specific needs and investment goals.
