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“It’ll cost you five hundred grand to see me” – Ascentric goes all in

Extra lang cat points if you can identify the source of the quote in the title.

OK, so just a quick blogette on Ascentric’s price change which hit the press today. Before I get going, I should disclose that we work with Ascentric on some PR stuff, so I’m conflicted and all that. If you don’t want to read basic arithmetic jottings as a result because you think it will be FAKE NEWS, then please click here.

I used to give the nice folks at Ascentric a hard time for the complexity of their charging structure; in fact back in the early days of the lang cat I gave them a ‘complexification’ award because their charges were the hardest to sort out of just about anyone.

A wee while ago it launched an all-in charging structure which was better, but left a few boxes unticked. The wheel has now come full circle and we have a full, proper all-in structure.

The headline charge is 0.3%, which is sharp enough to show reasonably well without getting in and among the price leaders for larger portfolios (this is all subject to some stuff about trading, which I’ll cover in a moment). There’s a minimum charge of £180pa which only hits you below £60k, so well below what most advisers are placing on platforms. The 0.3% is flat up to £1m and then tiers away.

What’s unusual about this is that it’s not just flat across wrappers – which is unusual enough – but also across asset types. The only other people to do this are 7IM and Alliance Trust Savings in its IFO structure. Both of those, however, have differential charges for SIPP (in 7IM’s case this is because it doesn’t have its own SIPP yet). That leaves Ascentric as the only genuinely all-in provider in the market.

Is that a claim to fame worth having? Is it a deal, a steal, the sale of the f***in’ century? If we look backward, maybe not. I don’t know what proportion of IFA-controlled assets are in exchange traded securities which normally attract trading charges, but it’s not high. But if we posit that trading charges have been an inhibitor of ETF, investment trust and other ETP usage, then this is welcome.

Let’s do some heatmaps, because what else are we here for?

ISA first – no trading charges included.

So that’s a decent showing – not as cheap as the fixed fees lot but certainly not far off the market at or around the £100k – £150k mark.

SIPP next – again, with no trading fees:

A bit sharper here, reflecting the fact that lots of providers still up their charges a little for SIPP because of the emotional trauma of collecting tax relief or something.

And finally, let’s look at an MPS scenario with quarterly rebalancing of a 20-asset portfolio:

This is stronger again – Ascentric works very nicely here in the £100k to £500k space. This is all down to multi-wrapper and multi-asset agnosticism, if you know what I mean, which you probably don’t, but that’s OK. We’re together, and that’s what counts.

All these scenarios miss out the biggest strength of this new price strategy – no trading charges on ITs, ETFs and so on. If we did some scenarios which included a bunch of ETFs in a model, for example, Ascentric would do very much better.

So, house loyalty aside, I like this new shape from our Bathian friends. It’s not all great – I’d like to see a cap for bigger funds (there’s a collar for smaller ones and fair’s fair), and I’m not sure I like seeing cash included as a chargeable asset. Although it’s worth pointing out that Ascentric won’t skim cash any more, so if rates do head north it’s likely clients will be better off.

But my main thing is that Ascentric, 7IM and ATS are all getting into what I always thought wrap platforms were meant to be – genuinely open environments which were tax wrapper and asset type neutral. I’m really heartened to see this.

Financial planning and implementation can happen without any concerns about cost arbitrage between asset types in these kinds of structures, and how much more platform could that be?

The answer is none. None more platform.

 

PLATFORMS THROUGH THE LOOKING GLASS

If it was a human, the platform sector would be studying for its A levels (or Highers, if it lived in Scotland). It would have started drinking about two years ago, wouldn’t be able to get a Glastonbury ticket for love nor money and would be seriously confused at the concept of a telephone that’s fixed to a wall and doesn’t take pictures.

Yes, it’s now 17 years since what we now recognise as the advised platform sector was born. In that time, some have come and gone. For much of this period, there was a steady stream of new entrants, peaking in the mid OO’s and tapering away by 2011, and of late, the first flurry of sector cannibalisation.

There’s been some bad practices: behind-the-scenes rebate pocketing; interest scarfing (which mattered when interest was higher); pain inflicted on advisers by technology changes and variable service quality, among others.

ORIGIN HAS INFLUENCED PROPOSITIONS

The sector has come to be made up of propositions with a range of origins. Some are product lines of the life company arm of multi-nationals. Some were entrepreneurial start-ups. Some were disrupter brands. Some grew from SIPPs. Others started life as DFM services. And that’s still only some.

This is one of the reasons that it’s so complex and hard to make sense of; the general pattern is that a platform’s origin has a significant bearing on the type of proposition it becomes (although, just to make things even easier, that is not exclusively the case). You have independent wraps that have always had agnostic, whole of market fund ranges and stayed clear of the whole planning tool thing. You have lifecos that very much do the planning tool thing and act as a conduit to the sister company’s fund range (allegedly). A cohort that are particularly good at stockbroking and meeting more sophisticated investment needs. Some that only really do collectives. Some that are basic. Some that are cheap. Some that are expensive. Some that have a big focus on client facing tech. You get the drift.

It means advisers really do have a job on their hands working out which one, or ones, of 25+ can meet the needs of their client proposition(s). The regulator expects whole of market assessment and records to be kept. That’s why due diligence has become such a big thing. It’s an industry in itself for advisers and providers alike.

But, I don’t see how accusations of keeping things hidden can be levelled at platforms. Yes, some are clearer about their target market than others. And in some cases, there can be an annoying tendency to try and be all things to all people – that sort of thing ultimately helps no one. However, when asking questions about proposition, the lang cat has always found that platforms are the most transparent of the markets we assess.

SHAMELESS PLUG ALERT

As an example, we recently launched our very own platform directory and found all of the platforms to be very happy to answer everything we asked (and we only publish a portion of the data) and there’s a further four platforms in the pipeline. Whether it be for adviser due diligence, our own publications or specific research projects, we find that if you are prepared to do the hard yards of primary research, the platforms tend to be open.

Business performance is, as you might expect, less transparent than proposition. But even in this area, reporting of AUA and new business data has been in place for many years, and much of this is passed on to fund groups and advisers by consultancies.

Profit/(loss) measurements are notoriously tricky to truly get to the bottom of, mainly for the platforms nestled among complex business structures, and there are a few who successfully obfuscate. But only a few. And in the long run, I don’t think it does them any good.

TRANSPARENCY WORKS IN PLATFORMS’ FAVOUR

But overall, we generally view platforms as a very transparent corner of the financial sector. Tell me another part of the relatable market where it’s as easy to openly access and compare provider information, especially at no cost?

But it’s not all good. We think it’s much harder for people to get hold of the same level of detail on SIPPs, or personal pensions, or corporate pensions, DFM’s and back office providers. Yet transparency clearly benefits platforms; the easier it is to research a product, the more likely you are to use it. We’d certainly like to see – and are going to try to bring – a similar level of transparency to other areas.

MAKING THE COMPLEX SIMPLE IS WHAT’S HARD

Don’t get me wrong, there’s always more to do. And because they are hoovering up everyone’s assets, platforms do have a responsibility to be ever more transparent.

The issue therefore is not that platforms keep things hidden, it’s that they are complex beasts. No two are the same, they sometimes have different names for the same things, sometimes the lily is gilded and they continue to rapidly develop in all different directions. So, the challenge for the sector collectively; advisers trying to assess them, organisations trying to help advisers assess them and providers themselves, is to keep getting better at making the complex simple enough so that users can make the right decisions.

You can say what you want about platforms. We certainly do. But an establishment-level lack of willingness to share information is not one that I recognise.

PUNS ABOUT SPECIALIST SIPP DUE DILIGENCE ARE HARD TO FIND

Here at the lang cat, we’re no strangers to banging on about due diligence. We’re also not above making suggestions as to how it could be that little bit better/less painful for all concerned. But our feline musings have traditionally been aimed at platforms.

While no-one could accuse the regulator of being overly specific in articulating its expectations of adviser due diligence into platforms, it has at least offered some pointers between various papers and its list of nine issues that impact overall platform suitability for investors. Specialist SIPP providers by comparison, are left out in the cold.

But scrutiny is as scrutiny does and a lack of clear direction does not get in its way. The recent introduction of new capital adequacy limits for SIPPs is a prime example and has led to a greater focus on the sector than ever before. Which is where we come in. The lang cat is neither a regulator nor a SIPP provider (hope that helps) but we’ve been around the industry for long enough to think some deep(ish) thoughts and take a swing at what might matter in terms of scrutiny for advisers to be testing out SIPP providers with.

Turns out we’re far from alone in this. In light of all the industry noise, @sipp wanted to create a new due diligence guide. Now, anyone who has read a provider due diligence document might be forgiven for confusing it with a marketing brochure. Slanted, far from enchanted, silent on the difficult stuff and full of tilts here and there.

Advisers know this, and so do we, and so do the chaps at @sipp so they felt an independent approach might be refreshing. Something neutral, balanced, impervious to marketing fluff and adorned with occasional high-quality cat pictures. I might have added one of those criteria. And if this helped move the SIPP due diligence issue along a bit, then so much the better.

Anyway, we were happy to get to work. Particularly as @sipp let us develop the questions, and promised to answer the ones we came up with.  So we developed a question set, made @sipp answer them, reviewed the responses (which we replicate faithfully in the paper) and added our own views. And that’s it. Oh, and there’s a brand new cat picture. Natch. And that’s the paper you will shortly have in front of you.

We end the paper with a few suggestions for advisers to help carry the whole thing forward. No-one likes a spoiler so I’ll let you find out for yourself when you download the paper. You’re going to, right? It’s free, after all.

A few things stood out for us as we put on our adviser hats (stylish, practical and at a jaunty angle) and worked through the process.

  1. Don’t get blinkered into looking at any one measure in isolation. The robustness of any financial provider, be it a platform or a specialist SIPP provider, is the sum of many parts. Looking at those parts individually and in aggregate speaks to the specifics of your business, clients and priorities.
  2. Due diligence is not a passive process. The onus is very much on you to create and maintain a relevant question set (and don’t forget to subject it to challenge). It should be structured to enable answers that first, are of use in the due dil process and secondly, don’t allow for a cut and paste from the Big Book of Self-Congratulatory Marketing Fluff.
  3. It’s not always all about the content of the responses. Sometimes how your due diligence request is treated can tell you everything you need to know, or a lot of it. Some things you have to take a provider’s word for but some you don’t. Test a claim of great customer service by picking up the phone.

I have enough self-awareness to know that a good number of you will have skimmed this blog looking for kissy noises about @sipp. Sorry to disappoint, but really? Have we met?

What I will say is that we’ve carried out a good number of commissioned analyses now and in each case we’ve found providers really doing their best to be open. There does seem to be an emerging willingness to engage, not only with potential customers, but with the industry as a whole. The days of ‘hoodwink marketing’ aren’t dead, but we think providers are increasingly working out that honesty and transparency leads to more, better business in the long run. And that works for everyone.

Enough! Go download, and let us know what you think.

A real person writes

Every so often we get emails from real people. Normally they are from a nice chap in Nigeria offering the chance of a life changing investment opportunity, but whenever we appear in the consumer press the queries normally arrive shortly after. One such email is below, shared in full with the kind permission of the author (thanks Mr H). This is posted without comment, mainly as it’s the first day back at work after 2 weeks off, but also as I wanted to share the email in full as an insight to how one person thinks about their investments.

Hope you find it interesting. Let us know what you think in the comments below.

Oh, and Happy New Year.

 

Email 

Have been doing my homework on investment platforms with a view to choosing one that can offer me a complete service:- share dealing, ISAs and SIPPs and note with interest the lang cats most recent platform review from July 2016.

I have looked at articles from several financial  websites – Investors Chronicle, This is Money, Money Saving Expert etc but many of the articles seem to focus on the basic features, yearly costs of operation but omit to mention points such as :-

features –  removing cash from an ISA and preserving the ISA status by having the ability to put the money back into the ISA at a future date – very little mention of this; dividend reinvesting, cost effective monthly drip feeding etc, parallel accounts for family members – all of these features  I would value.

ease of use – making a website user friendly is a prerequisite to any service offering from a company with a web presence – be it ft.com or easyjet.com but it is surprising how many companies get it wrong.

funds offered – some seem to offer a few thousand some several thousand but no indication of the quality or type of funds offered. I don’t want to go with a platform only to find they don’t offer a fund which is recommended in an investment article or find the funds they offer are poor investment quality.

reliability – various comments from users experience highlight this as been a major issue with people struggling to transfer accounts, unable to trade on days when the market is high, administrative errors, websites overloaded etc, etc.

demonstration accounts – my biggest frustration has been the lack of access to the platforms to get a glimpse of how they operate – they all state that you need to setup an account – very few have demonstration accounts (as of yet I have never had to purchase a car to see how it drives as most garages have demonstration models).

financial status – there seems to have been consolidation within the platform market in the last few years with platforms being sold and I guess that this will continue as scale of users is the only way to make future profit and that many of the companies that operate platforms as a bolt on to their existing business may find it difficult to justify the ongoing investment in running a platform, therefore I have tried to evaluate who is in it for the long term, has a healthy balance sheet and have struggled on this point as some of the platforms don’t have that many clients when compared has you have done with Hargreaves Landsdown.

I have tried to narrow my choice down and have looked at Charles Stanley, Interactive Investor, Hargreaves Lansdown, Barclays and Shareview/Selftrade. Would I be correct in saying that many platform providers do not do everything “in-house” noting Barclays uses AJ Bell for its SIPP’s – is this common and should I consider only companies that do it themselves for fear of them passing the buck if there is a problem as you have mentioned in previous years reviews.

Is there such a thing as a VW Golf of the platform world – cost effective, reliable, useful features and good in the long term – after all choosing a partner for your investments is not something that should be taken in a hurry based on a whim as it may cost you an arm and leg in the future both financially and otherwise or am I asking too much.

I would rather spend time and effort now, finding a suitable platform company that can offer these services and not have to change in 18 months time as I see many investors who do – frustrated that they have to go through the hassle of finding a new platform and all of the time/costs in moving their investments, so your help would be appreciated.

 

 

the lang cat’s albums of 2016

Last year when I wrote this, Mike Barrett got in touch to say ‘not in my name’ and it was generally agreed that I don’t speak for the whole lang cat team when I do these lists. So before I get going, in the interests of balance:

  • Mike, our own superstar DJ, has his own Spotify playlist of the year here
  • Shona is sad about George Michael
  • No-one knows what Lucy likes because she won’t risk telling us
  • Pam has exceptional taste but doesn’t shout about it
  • Terry pops sneaky metal on when no-one’s listening
  • All the rest 20/1 bar

Anyway, here’s the important bit. 2016 has sucked in many ways, but for music – and metal in particular – it’s been great. So here’s 10 of my best this year…

10: Pixies – Headcarrier – much, much better and glimpses of the old magic. Mike and I went to see ’em at Brixton Academy and it was great.

9: 65daysofstatic – No Man’s Sky – this is a soundtrack to the big open-world video game, but don’t let that put you off. Brilliant mix of guitars and electronics. And an awesome gig at Glasgow Art School to boot (the Islington one below is a poor substitute).

8: Killswitch Engage – Incarnate – I like metalcore. There. I said it.

7: Anthrax – For All Kings – this was SUCH a good thrash record and right up there with Among The Living, for those who remember back that far. Metallica might like to have a listen and remember how to write songs under 8 minutes in length.

6: Yorkston Thorne Khan – Everything Sacred – this is an amazing mix of folk, jazzy bits and traditional Sufi sarangi playing from James Yorkston (who gave the lang cat its name), Jon Thorne of Lamb and Suhail Yusuf Khan, who is huge in India and will be here, soon. One of the gigs of the year at the Edinburgh Festival too (though I had to sneak out, sorry James). Broken Wave (Blues For Doogie) below is a rework of the requiem JY did on his last record for his late bass player, Doogie Paul. It was a hard listen before; it’s lifted to another place now.

5: Ihsahn – Arktis – no, you’ve never heard of him but he was in black metal pioneers Emperor. This record is stupidly good, mixing almost poppy melodies with proper singing and then blackened guitar onslaughts with excellent Cookie-Monster grunts. Takes some getting used to but absolutely worth it.

4: Frightened Rabbit – Painting of a Panic Attack – this was just lovely stuff from the Selkirk band. My Scottish music album of the year (beating Malky Middleton, YTK and Mogwai, so that’s saying something).

3: Devin Townsend Project – Transcendence – even people who don’t like heavy music sometimes like Dev, and if there’s any justice this will catapult him into the biggest of the big leagues. Listen to Stormbending and thank me later.

2: Moonsorrow – Jumalten Aika – this is sort of melodic black folky metal, sung in Finnish throughout. It’s the record I played most this year. If you’ve ever liked heavy stuff then try the unpronounceable Ruttolehto incl. Päivättömän päivän kansa which translates as ‘Plague Grove incl. People of the Dayless Day’. It’s 15 minutes long and worth every second of it.

1: Nick Cave & the Bad Seeds: Skeleton Tree – so much has been written about this and Nick’s son’s death. He wrote it before the unthinkable happened, but if you were superstitious you’d find lots of foreshadowing of it in the lyrics (mind you, you could probably say the same for any of his records). This whole thing is drenched in grief and doesn’t let up. It’s an unbelievably honest piece of art as much as a record, especially if you watch the accompanying documentary One More Time With Feeling. Listen to Else Torp, the Danish soprano, singing on Distant Sky, and Cave’s lyrics:

“They told us our gods would outlive us
They told us our dreams would outlive us
They told us our gods would outlive us
But they lied”

and try to keep it together. I can’t.

 

Honourable mentions go to Insomnium, another Finnish band, with Winter’s Gate, a record that is one 45-minute song. It’s probably the best melo-death release of the year and only isn’t on the list cos I only came across it 2 weeks ago. The same Johnny-come-lately fate befalls Dark Tranquility’s Atoma, which has actual songs on it but is almost as good as Insomnium. A prize year for metal is also rounded out by Anaal Nathrakh’s The Whole of the Law, which is ace despite horrible brickwalled production. Away from metal, it’s all Bowie and Bob Mould and King Creosote and Malcolm Middleton, all of whom could easily have made the list.

Metallica isn’t on the list.

Gig of the yearHector Bizerk’s swansong at Glasgow School of Art. Louie and Audrey are missed. Barry Neilson from Nucleus was there as well and put this up on YouTube:

So that’s mine. Stick yours in the comments if you can be bothered.

Thank God that’s over – the lang cat roundup of 2016

If you’re reading this, well done. You have only – assuming you’re in the UK – to survive 8 more hours and you’ve got through a year that’s been remarkable for all the wrong reasons. If you’re one of our Australasian readers, stop being smug. We know you’re across the line already.

I do one of these every year whether you want me to or not, and to be honest it serves as much as a palate cleanser – a way to clear the psychic custard, as Julian Cope once put it – for what’s to come as anything else. This year has been weird in many ways, and so I’m particularly pleased to spend 20 minutes in the momentary quiet of Hogmanay afternoon working out what I want to leave behind and what I want to take with me.

In our industry, the year started in a really moribund fashion, I think. Everyone was sort of all clagged up, still dealing with pensions freedoms and working out what the hell to think about LISAs and all that good stuff. For platforms, there was little of excitement happening, and little sign that much would.

But things did come to life, and we ended up with a fair amount of fun stuff to poke with a stick. Here are the things I’ll remember:

  • FAMRwe called bullshit on this at the time, proving if nothing else that people will read your stuff if you use swearie words.  Maybe we had unrealistic expectations, but for us this really didn’t move anything very much along. One positive thing, though, is that some folks we know have started having much more punchy discussions with them as regulates us on the basis that we can’t dick around for ever and need to get on with what we’re doing, especially in the advice v guidance sphere.
  • Standard Life bought Elevate, which sparked near feverish excitement, and saw a number of our compadres forget in their scramble to say ‘see, told you’, that there are hardships involved for the poor buggers that work inside platforms when these kind of deals happen. All in all the deal made sense, especially at the rumoured sale price of under £40m – this will certainly give some others who want to sell up pause for thought in terms of valuations. SL has said it’ll keep Elevate as a separate proposition, which we don’t think is sustainable, and has hiked its charges, which causes all sorts of interesting issues. We don’t care about the increase – we do care that those on special deals aren’t shouldering their share of the burden.
  • Secondary annuities got taken out behind the woodshed, which is a relief to everyone, even those who don’t know it yet.
  • Aegon bought Cofunds for £140m, news of which was treated unkindly by some folks. We thought it was nice for the Witham lot to have someone in charge who actually gives a toss. It moves Aegon – by the time you include Cofunds, its own ARC book and the BlackRock DC book it bought in May – to about £100bn in platformy assets, which is, by anyone’s standards, a shitload. Now all they have to do is get it replatformed and make sense of it…
  • Speaking of replatforming, in our advised platform guide (still for sale etc) we reckoned that £208bn was currently in flight, if you include Cofunds. That’s not far off 2/3 of all advised platform assets. I still don’t know, and neither do you, a single replatforming that’s gone well. This will keep being an issue for some time.
  • We finally found out how much Nutmeg has under administration. £500m. #thatisall
  • Speaking of which, the first wave of robos broke on the shore, and we’re waiting for the second wave to hit. Vanguard is the one to watch, along with Santander and the banks. We also think Scalable Capital is doing interesting stuff (but we could be biased).
  • But really our biggest news of the year was the FCA’s interim findings of its asset management market study. This will – brave words alert – cause more potentially positive change for customers than anything since PS13/1 and maybe since RDR. Another way of saying that is that this will screw the asset management industry at a velocity and in a way that is all too familiar to advisers, lifecos and platforms. It’s nice to spread the love.

Over at the lang cat we had a pretty damn good 2016. We got joined by some amazing new folk, some of whom actually resemble normal, functional human beings. We’re doing our best to turn that around. We worked with some interesting new clients, including robos, banks, and even a crowdfunding business which was new for us.

We made a number of people cross, which pleases us greatly – but we only ever do this when we’re sure of our ground. Speaking of which, if you watched carefully you might have seen us start to pump out a lot more industry data than in previous years. Terry, Steve and Lucy (together known as #teamdata) sat through the thick end of 48 solid hours of platform demos and spent dozens, maybe hundreds of hours more putting together what we think is now the industry’s best databank on who does what, why, how, with whom and for how much. We put some of this out in our Guide and some more in one of the things I was proudest of this year – our new platform directory. This is – though I say it myself – an awesome repository of info, which will be forever free to anyone who wants to look at it. No-one pays to be in it; no-one gets any data in terms of who’s looked at it. It is the by-product of the work we do anyway, and it really is a labour of love.

Over on our PR and comms side, we signed up loads of cool new clients, with more to come in the New Year. Most of that work happens behind the scenes and if we do it right you’ll never know it was us. But, again, look carefully, and there’s a decent chance you’ll see a wee cat footprint somewhere.

So that’s it. Thanks to all the felines, all our families, clients, readers, subscribers, tribute bands and all those who’ve made 2016 diverting enough to forget about the world going completely to hell in a handcart. All the best for 2017. I’ll leave the last, more uplifting words to Edinburgh’s Gallery of Modern Art.

No escaping basic arithmetic – all about the ATS price changes

As 2016 breathes its last, we are plagued, sorry, blessed by a mini-flurry (Worst. Flurry. Ever.) of pricing changes from platforms. Last week we had Elevate / SL; this week it’s our Dundonian friends, Alliance Trust Savings.

ATS is increasing its fixed fees on both direct and advised business, but offsetting that in part with free trades and reduced trading costs depending on which flavour of their service you use.

STOP! DISCLOSURE TIME!

ATS is a client of the lang cat; we supply PR and marketing services to it. And to further complicate matters, GBST, who supplies the underlying Composer technology to which ATS is currently moving, is also a PR client of ours. So I’m conflicted all over the place on this. If that means you feel you can’t trust what you’re about to read, most of which is just arithmetic, then off you pop. Otherwise, know that I’ll play this with a straight bat. I haven’t given this blog to ATS before publication; nor have the guys there asked me to.

WRAP IS AS WRAP DOES

At the same time as changing custody and trading charges, ATS is introducing a  new concept – £700 all in for its complete wrap service; that is to say ISA, IDA and SIPP, with trading included at 35 trades per wrapper per year – irrespective of whether those trades are shares, ETFs, ITs, funds or whatever. You also get the model portfolio ‘bundle’, which gives free rebalancing.

Without wanting to be completely facile, that’s 0.14% on a £500k portfolio. Or if you’ve got a client with a £500k SIPP, a £150k ISA and a £75k IDA, for example, it’s 0.096% or under the magic 10bps mark.

Before I get into the analysis, this bears a few more words. I started working in platforms 10 years ago, and one of the things that I believed platforms would do would be to create a completely neutral playground for advisers and clients, where they could allocate wealth across investment and wrapper without any concern that one part would cost more than another. Hardly anyone has gone for this – the economics of outsourcing bits of platform provision always get in the way – and so I’m really keen on this new shape. For my money ATS and 7IM are leading the way here. Whatever your views on other bits of their propositions, I think they now share the crown for the levellest playing field (for reference, 7IM is 0.3% with no trading charges including shares).

READ ALL ABOUT IT

Increases in fixed fees from time to time are part of life; the platform can’t rely on increasing revenue from people adding more money, rising stock markets and so on. This time, though, the rise ATS is putting in is a bit more fundamental, which is to say quite large in percentage terms. Some of that is down to the business not increasing charges in previous years (for example, the advised Inclusive Fee Option or IFO shape hasn’t headed north since 2014). But most of it is, for my money (and I have some with ATS) the sign of a business that’s had a ground-up rethink about its operating model and how it sees the world and is resetting itself for that. I can’t think of much more to say about it than that.

The price changes (‘cos they’re not all rises) look like this:

ADVISED (STANDARD)

On the standard model prices rise, but you get four free trades bundled in which more than takes care of the increase if you use them (these trades would have cost £50 in the old model).

ADVISED (ALL-INCLUSIVE)

A chunkier rise here, and a reduction of the number of included trades from the strangely precise 37 down to 35. Trading charges above the 35 allowance in the IFO shape remain at £6.25.

ADVISED (OTHER STUFF)
  • The model portfolio charge (which gives free rebalancing) rises from £90 to £120
  • Regular trading charges and regular dividend reinvestment charges stay unchanged at £1.50 and £5 respectively.
  • Trading charges drop from £12.50 to £9.99 (or less if you have loyalty discounts)
  • Extra charges are coming in if you don’t use the online service, but you almost certainly do.
DIRECT

 

 

 

  • ISA/IDA are £120 a year. SIPP (‘savings’) is £252 including VAT. SIPP (‘income’) is £342 including VAT.
  • Regular trading charges and regular dividend reinvestment charges stay unchanged at £1.50 and £5 respectively.
  • Trading charges fall from £12.50 to £9.99 a pop or less with loyalty discounts.
  • Offline trading charges go up and there are new charges for receiving paper statements etc.

 

QUICK, PENFOLD! TO THE CALCULATOR!

Here’s what it does to the tables (as ever, just a subset, subscribers get the full whack):

ADVISED ISA

 

ADVISED SIPP

 

 

 

 

DIRECT ISA

 

DIRECT SIPP

 

 

 

 

 

 

 

 

 

 

 

 

 

If you’re wondering why the direct tables show a price drop, it’s because we assume 4 trades per year: ATS has bundled those trades into its custody fee and that’s enough to offset the rise. We assumed this 4-trade level in our last annual Guide, incidentally, it’s not something we’ve put in for this exercise.

WHAT IT ALL MEANS

So what can we glean from this? Mainly that ATS is still stupidly low cost for larger portfolios. Frankly, it could double its fees and for your wealthier clients (or for yourself if you’re a wealthier direct investor) it’d still rain over most other offerings. A £250k direct SIPP is 0.1% vs 0.45% at Hargreaves Lansdown, for example.

I like that the trading charge has dropped – £12.50 was too much.

The price rise (and it is a rise; a majority of advised clients will pay more) comes at a difficult time. ATS is coming to the end of a replatforming phase and, in common with every other provider who’s been on or is currently on that journey, it has found it challenging. As have advisers and their clients (direct clients haven’t changed yet).

In one way it’s a shame; in another it’s just one of those things. If you use ATS or are thinking of it, I would probably say that it’s good to have all the big changes done and dusted.

If the new charges mean you want to leave ATS, it’s waiving exit fees until 5pm on Friday 27 January for both advised and direct clients. I don’t like exit fees irrespective of who charges them, but fair play for giving people a decent amount of notice and a free pass to the out door if they want it.

Aside from any loyalty I have to my client, the market needs an alternative to percentage based charging. As advisers see more, wealthier clients, it’s more and more obvious that platforms at the top end just charge too much. And yes, some like Transact are trending down; others like Elevate are heading up. ATS has moved the point at which it becomes competitive up; whether it forms part of your world is entirely up to you. Thanks to the Department of the Bleeding Obvious for that last.

So that’s it, and presumably that’s the last charging change before Christmas. It had better be…

What’s 0.04% amongst friends? Standard Life hikes Elevate prices; causes eyebrow raising in Leith.

I’ve always liked folk who buck trends. Counter culture is my favourite kind of culture. So you’d think I’d be supportive of Standard Life’s decision to buck the downward trend of platform pricing by increasing Elevate’s charges.

And in some ways I am. In others, though, I’m not, and I’ll tell you for why.

It’s not about the increase itself. In truth, I couldn’t give a damn about four basis points, and neither could you, and neither could anyone you know. This stuff is within the rounding error of an illustration and it couldn’t matter less on a client by client basis.

It’s not the principle of it either. SL has a bit of a job on its hands – Elevate hit £11bn or so without making a profit, and that’s not good enough. SL feels it has to balance the books, and if 4bps on average is what it takes then that’s what it takes. In the great scheme of things it’s not a big deal; we reckon it will net SL in the region of £500k a year on the basis of gross flows remaining consistent into Elevate.

It’s not reflexive nay-saying either. For the record, here are some of the good things:

  • 4bps is not much (SL tells us that’s the average increase so we’re trusting that’s true).
  • You still get a stepped structure; something which I’d love to see more platforms – including SL Wrap – adopt.
  • SL is clearly sensitive to outflows, which is why it’s allowed a big pricing differential between Wrap and Elevate to persist: that’ll be giving the moneymen in Lothian Road major acid reflux.
  • SL is promising to leave Elevate as a standalone proposition; I can’t help thinking that’s not a viable long-term position, but that’s for another day.
  • SL – and it still surprises people when I say this – is very good at platform provision. Other than price and traditional Edinburgh you’ll-have-had-your-tea froideur, it does very little wrong. There is no downside in SL getting its hands on Elevate, and lots of potential upside.

SUMS, DEAR LORD, SUMS

So before I don my grumpy hat and explain why I’m not giving SL a complete pass on this, let’s do a quick sum or two, for is arithmetic not one of the few things that can save us from the infinite, blackened void and drag us, dishevelled, shrieking and wild-eyed, towards the light? Yes, yes it is.

With a nod to our Steve, here are the new charges in our patented* heatmap format. As ever in blogs and free stuff, it’s just a wee subset of the whole market and a few portfolio points.

Here’s ISA:

elevate-isa

 

 

 

 

 

And here’s SIPP:

elevate-sipp

 

 

 

 

 

So, y’know, a bit worse, and drags Elevate back towards where it was before it made a big price cut several years ago; something which really helped its flows.

Let’s put it another way. A client with a £100k SIPP now pays £360 a year; they paid £320 before. That’s a 12.5% hike in charges; enough to be irksome, but not so much that it would get clients riled up enough to move, even if they understood their charges, which they don’t.

4bps isn’t the whole story, though. Head up to £500k, and you’re paying an extra 8bps or £400 a year. That might cause a few more raised eyebrows – but not that many clients on Elevate have a half mill SIPP.

IN YOU COME, MR GRUMPY

So no, I can’t get worked up about the price hike in and of itself. But, in no particular order, here are a few things that do wind me up. Ready?

  • SL makes a play of pricing having to be sustainable and all that, quite right. But given that Elevate was always one of the most, er, flexible platforms when it came to special deals, why aren’t those deals changing? Why are new clients on standard terms cross-subsidising those who are on deals? And before anyone asks, yes we’ve spoken to firms who have special Elevate deals; their SL/Elevate contacts have been quick to reassure them that no, of course this doesn’t apply to you. One rule for one…how does this sit with TCF?
  • If SL wants to give clients a ‘clearer view of what they have to pay’, as it claims in its release, will it apply that same logic to its own many-tiered Wrap structure?
  • There are some curious subtexts. Check the release: “In making this change, we are also making a commitment to Elevate advisers to deliver the developments they want for their clients.” To put that another way, you moaned about functionality, so your new clients will pay more for it. Unless you’re on a special deal, of course.
  • SL consultants are already positioning Elevate as a simpler, cheaper alternative to Wrap. If that’s the case, what’s the virtue of adding big chunks of new functionality, and hiking prices to pay for it? I’m not saying it’s easy to get right, but the business strategy appears confused to me.
  • SUPERCLEANto us is a busted flush and has been for a long time. We think the drawbacks mainly outweigh the benefits, and we don’t like seeing firms try to mask their own pricing decisions with fund deals – remembering of course that many deals have a part you don’t see which nets the provider additional margin on the insured back book. That’s a preference thing for us – in this case the 4bps bump is so small that yes, if you plump for the new discounted fund deals then it can defray the additional price (although if you’re that motivated you could get considerably lower Total Cost of Ownership elsewhere).

So there you go. On the one hand – meh. On the other – this is the first example of just how difficult it is in a business context to start bringing propositions together, even if you’re keeping them apart.  It’s not easy being green yellow and blue.

 

 

*not patented

Guess who’s back, back again

The last few months have been an exciting time for Leith’s leading * platform and investment consultancy. We’ve never been busier, and increasingly we are convinced that most of our core markets are about to be disrupted. The recent FCA Asset Management Study is without doubt my favourite read of the year, a real page turner, and I for one can’t wait for the next chapter to be revealed next year. Over in the D2C platform world, there has been much speculation recently about how this market is also about to be disrupted. At lang cat HQ we completely agree, but initially we think this disruption will come from the banks as opposed to the fintech world, and the great news is this disruption is now starting in front of our very eyes.

Last week Barclays quietly rolled out their direct investing service to their entire current account customer base. And this week they started telling people about it. Anyone who has a Barclays current account can access the service now, with a roll-out to non-Barclays’ customers coming next year. This follows on from the recent (much quieter) launch of Santander’s Investment Hub all of which means that, suddenly, over 25% of the population (based on current account market share) are now able to access an investment platform through their bank. This feels disruptive to us, and is certainly a new channel that advisers, advised platforms and D2C providers have not had to contend with over recent years. The banks are back….

Barclays very kindly showed me the new service last week (full disclosure, we have worked with them on some pricing analysis) and first impressions are good. The UI is clean & crisp, and is consistent with the current account portal where you will find the service. Considering the platform is built on FNZ technology this is no mean feat, and Barclays are one of the first providers to use the FNZ One platform which gives firms much more ability to bespoke the UI. Unlike previous FNZ deployments it’s impossible to tell who the tech supplier is, and the system looks great as a result.

Pricing wise, Barclays have been pretty aggressive. The core fee of 0.2% puts them amongst the cheapest platforms going, although with fees for some (but not all) transactions you could easily end up paying more than the headline rate. The good news is that the system very clearly discloses these fees, both at the point of transaction and at valuations, and there is also a pricing cap. With an ever increasing focus on costs and transparency this is a good move, and one we wish more platforms (especially in the advised space) would adopt. Whilst price isn’t everything, for certain customers this is an extremely cost effective option. Very early days, but this feels like a very significant launch.

ISA pricing

ISA (Assuming 10 fund transactions)

Fans of our work (Hello Mum) will know that we have been speculating about the banks returning to the platform world for a while now, posing our considered question of “what if the banks don’t screw it up? Again.” They have a huge advantage with their already acquired customers, something all the start-up D2C providers would kill for , but their track record isn’t great. A google search on the right (or wrong, depending on your point of view) words will bring up details of several enforcement notices for unsuitable advice and outcomes. As it stands, both Barclays and Santander are currently offering execution only services, but we expect this to change during next year. With financial advisers increasingly serving the HNW the opportunity, and arguably the need, for someone to fill this space with simple, transparent, low cost advice services has never been greater. Robo technology should, in theory, remove a lot of the causes of previous failures by delivering a consistent and repeatable advice process. If this is consistently delivering suitable advice then maybe, just maybe, the banks won’t screw up again. It’s a big opportunity for them, and the prize is theirs to lose.

* = probably

 

Where are the customers’ yachts?

So, exactly a year after the terms of reference were published, the FCA has lifted the lid on the asset management industry’s Pandora’s box in what could well (and hopefully will) prove to be a landmark market study. If ever you had any doubts of the depth & range of issues, 689 pages of documents, research and annexes will confirm the scale of the challenge facing the FCA. Based on some rapid speed reading, here are some initial thoughts.

If you have better things to be doing than reading 600+ pages of research, or even the full 208 page market study, then I’d urge you to read the 22 page executive summary at the start of the document. Even at the highest level there are several hand grenades tossed at various parts of the industry, which really do make unpleasant reading.

For the FCA to be stating that “economies of scale are captured by the fund manager, rather than being passed onto investors”, alongside analysis to show the scale of operating margins achieved by the industry relative to every other industry you can imagine (spoiler alert…asset management is 2nd only to real estate) is a damning indictment. Investors take on most the risk as individuals, yet the asset manager reaps the rewards. The Investment Association has stated on behalf of their members that “Providing value for money for the UK’s saving and investing public is our industry’s driving concern”. Having read the report this morning it’s hard to hear that statement and not laugh. The evidence indicates the exact opposite.

Probably the worst example of this are the £109 billion, or if you prefer £109,000,000,000 in closet tracker or “partially active” funds. These investors are paying active management fees for little if any active management, which as the FCA reminds us “are considerably more expensive than passive funds”. Even the passive boys are not immune from criticism here, with £6bn invested in passive equity funds with an OCF equal to or above 1% for bundled or 0.5% for clean. Again, the FCA states that “investors in these products are likely to benefit from switching to better quality, lower priced passive funds in the same investment category”. This is an area where the report falls short – as much as it is difficult for the regulator to mandate and enforce on price, it is very unlikely these customers are being treated fairly. Elsewhere the report highlights just how difficult it is for the end investor to navigate their way through this complexity. If, as the FCA state “investors are likely to benefit from switching” then they should act to ensure this takes place now.

Another area that jumps out is the statement that “we have concerns about the value provided by platforms and advisers and are proposing further work in this area”. As the agent, advisers select and use platforms, so need to be included in any further work, but this does feel like it’s more aimed at the platforms themselves than the adviser. For a long while now we have questioned the value that platforms deliver for certain client scenarios, especially where the platform is delivering little more than custody. Why is the customer paying 35bps for custody?

Looking forward, the proposal to introduce an all-in-fee makes a lot of sense. Devil will be in the detail here, especially in how and when it is set. OCFs are a historic measure, so can be priced once costs have occurred. We’d like to see the AIF (© the lang cat) be far more static. The asset manager sets the price, and it’s up to them to control their costs to achieve a suitable profit. If they do, great, champagne & cigars all round. If they don’t, tough, the AIF can’t change.

Finally, it’s worth a quick reminder just how important this stuff is. I recently wrote about just how terrible the industry is in communicating with its customers, and the urgent need to improve household saving ratios. In a low interest rate and yield market, charges can destroy the value of your savings and investments, especially through the magic power of compound interest. The asset management industry contributes a huge amount to the UK, especially in terms of employment, but the current level of profit is immoral, and at the expense of the investor. This needs to change, and the sooner the better.