Popular brokers are vastly understating investors’ total returns

Linda J. Dodson

Danny Cox, of Hargreaves, said many customers liked the way the broker calculated performance as it reduced the risk of any single investment skewing returns.

He said: “We are aware the current method doesn’t suit all clients. That said, many like the way that our gain/loss figure is calculated as it gives a current representation of investment performance.”

Other major brokers, including Interactive Investor and AJ Bell, use the same or similar methods, excluding profits or losses from sold investments from overall return figures.

An AJ Bell spokesman said: “Our figures do not show the performance of the cumulative amount actually invested by the customer.”

The firm is working on a solution that will show the total profit or loss made by an investor based on the original cash they invested.

“We don’t have a defined launch date yet but we know it is something our customers want and will be introducing it as part of our ongoing development programme,” he said. 

An Interactive Investor spokesman said: “It is really horses for courses, so while some investors may only be interested in how their investments have performed on a per trade basis, others might prefer to see the net effect in percentage terms. We are currently working on a solution to this.”

Fidelity Personal Investing is the only major broker to provide figures in a way that calculates profit and loss based on the original cash, known as “total return”. Even if the customer sells an investment and buys another, the return figure factors this in. It also provides return figures per individual investment.

Mike Barrett, of consultancy The Langcat, said the methods used by Hargreaves Lansdown, AJ Bell and Interactive Investor seemed sensible but he could see why investors were left wanting.

He added: “I’d encourage brokers to show performance figures for both the short term and long term. This will hopefully allow investors to see the benefit of staying invested, versus short-term volatility.”

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