James Daley

By James Daley

Last week, I wrote a blog about how Hargreaves Lansdown is charging customers £36 per fund to administer their account when they die. Hargreaves' response was that they were simply trying to be transparent - and accused their competitors, who charge less, as hiding the costs in other fees and charges.

It left me thinking about what really constitutes good practice when it comes to being transparent. Hargreaves claims that by charging up to £600 to administer a client's accounts, they are merely passing on their costs, and being honest about it in the process. But - as I was quoted saying in the trade press - what's wrong with absorbing this cost in the day to day fees that they charge their clients on an ongoing basis? After all, there's no itemised charge for keeping the lights on.

When I buy a bottle of wine at Sainsbury's, there's a penny in there to cover Sainsbury's electricity costs, a few more pennies to cover the cost of having a security van come round and take away the cash, and a few more pennies to pay for the staff who sit on the checkout (and a whole lot more besides). But I don't expect to see an itemised bill. It's simply the price of doing business. If you want to be a supermarket - you need to accept cash, you need to provide lighting in your stores, and you need to have some staff to help take customers' money.

The cost of doing business test

When it comes to financial services, it should be no different. Companies should feel comfortable absorbing the costs of being in business in their headline price, and should itemise additional extras. That way, customers can make meaningful comparisons against the basic headline price, and can compare the prices of any add-ons.

Back to Hargreaves and its death tax - well, to be fair, it's not straightforward. While death is a certainty for all of its clients, it's not certain that they'll die while they are customers of Hargreaves. It's possible they may switch.

Still, given that death is a certainty for all customers of stockbrokers and fund supermarkets, the right thing to do would be to include charges for estate administration in the headline price. After all, it's unlikely that you're going to be able to game the system by switching to a provider who has lower probate charges just before you pop your clogs.

For companies that are in doubt as to where to draw the line, the "cost of doing business" test is a good one. If you want to be a stockbroker, you need to be able to deal with the accounts of people when they die. It's a cost of doing business.