Ready-made portfolios risky and expensive, advisers warn

Model portfolios focused on attracting non-advised clients could be risky and expensive, advisers warn.

Non-advised giant Hargreaves Lansdown recently launched its “third way” proposition, Portfolio +, which provides investors with six ready-made portfolios ranging from Adventurous Income to Conservative Growth.

Portfolio + investors pay the ongoing charges of the underlying funds, ranging from 1.34 per cent to 1.46 per cent, and an annual platform charge of up to 0.45 per cent per annum.

Investment Quorum chief executive Lee Robertson says: “There is a potential for risk with these model portfolios. People could buy stuff they don’t understand or wasn’t what they expected. That is the risk you take when you try to cut costs.”

Informed Choice managing director Martin Bamford agrees non-advised model portfolios are “potentially risky”.

Yellowtail Financial Planning managing director Dennis Hall adds: “With advice and using low- cost funds, my clients get it cheaper. There is a lot of fat in there for companies like Hargreaves Lansdown, clearly.

“[Portfolio +] differentiates what they are offering slightly but it doesn’t make it any cheaper. I find it very unexciting as they are doing it purely for marketing and profitability reasons.”

Hargreaves Lansdown senior analyst Laith Khalaf says: “Portfolio + offers pretty good value to investors. It is not the cheapest one, it is not a tracker, but you get the platform, the underlying managers, and a lot of services within the portfolio.”