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Caught in a ZIP – first look & pricing analysis at Zurich Wrap

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So at the Scottish IFP conference yesterday (which was excellent) I was lucky enough to get a sneak peek at Zurich’s new retail platform (the Zurich Intermediary Platform or ZIP – I’m not kidding, you can imagine the forthcoming ad campaign) and a run-down of its pricing. To be fair, anyone who went up to the stand was equally lucky, so it’s not like I was getting favours or anything.

I’ve run ZIP’s charging through the patented lang cat Price-O-Meter and the results are below. I’ve also got the structure for the new Aviva on-platform pension wrapper so I’ll touch on that too. This will be quite a long post, so strap yourself in.

Before we get going, anyone who’s bought the lang cat’s Guide To Platform Pricing, whether a provider or an adviser, will get an in-depth full update on all this, probably tomorrow or Friday depending on whether I get it looking pretty or not. That’s a free service. We’re all about the value here, oh yes indeed. If you haven’t bought the Guide yet and would like to – and we could hardly blame you if you do – then go here. If you’re an adviser use the code CHEAPCAT and you’ll get £50 off. No discounts for providers, so don’t ask.

Right, on with Zurich. The first thing to say is that of course this has been an horrendous development for the guys working on it. It’s been delayed and delayed and (completely unconfirmed) rumours suggest that the spend is in multiple tens of millions to get it to market. So has it all been worth it?

The front end looks really nice. Of the 3 main retail FNZ-powered platforms (Standard, AXA Elevate and ZIP) this is easily the most aesthetically pleasing. The Zurich guys have gone to school on the other two platforms and tried to make this different and iron out some of the usability issues that have plagued the other two. I was genuinely impressed with the front end as an example of its type.  The front end is customisable by the adviser in terms of look and feel, so white-labelling should be a lot easier and more accessible than with many others.

Under the hood, you get a cash account, a SIPP, an ISA (stocks and shares & cash) and a GIA. No bonds at the moment, but the existing Zurich offshore bond can use the GIA as its investment vehicle, so, y’know, whatever. Mutual funds are included natch (all unbundled so should be no issues with passives) and ETF/equity/derivatives/debt trading is there through an integration with Winterflood. All pretty vanilla, but 92% of ice cream vendors say the most popular flavour they sell is vanilla (in the USA at least) so maybe that’s not too bad.

Tools – Advisa Centa and FE are plumbed in, but interestingly when you go into their sections, you effectively leave the platform – and are told this – and the branding shifts to theirs. Data integration is apparently deep, but I didn’t get a chance to test this. FE is providing the fund and equity factsheets. Model portfolio functionality is as you’d expect, with some pre-loaded OBSR portfolios for the terminally lazy. Clients can have view only access.

I think ZIP will push on usability, on financial strength (remember that Sterling is a pretty big business), on a no-cross-sell guarantee (wonder who that’s aimed at), on white labelling and probably on not being like the other two. If you don’t like the existing offerings and you do fancy a lifeco-backed wrap the new unholy trinity of AEGON’s ARC, Aviva Wrap and ZIP might be the competitor set.

So let’s get into price, which is why you’re reading this. Here’s the structure:

The ZIP SIPP (ho ho) is an additional £75pa, no drawdown charges.

OK, so a few things. This is tiered again – thanks guys – and has no caps, collars, minimum charges or indeed anything innovative at all. In fact the only thing you can say for it is that ZIP is the first (I think) platform to go to 3 significant figures on its charges. I think a charge of 0.325% as opposed to 0.32% or 0.33% is perhaps the silliest thing I’ve ever seen in platform pricing, and I’ve seen a bit. Completely daft, driven by actuaries and unworthy of the good work done on the front end of the system. If Zurich has the flexiblity to change this structure before going to market fully it should, just on point of principle.

So how does this look in a table with a stochastic scatter of competitors? Here’s a cut down version – full analysis with 19 providers across 10 portfolio points is available to subscribers to the Guide. ISA/GIA first:

From this we see that ZIP is mid-table across the piece, but especially under £100k. Between £100k and £200k you see it in the mix more, in pretty much a dead heat with Skandia and Nucleus. ZIP is considerably cheaper ‘for the moment’ than AXA Elevate throughout and is clearly placed to compete heavily with SL Wrap. Of course, if those others cut their charges ZIP could look flat-footed.

On the SIPP front it’s a slightly better story:

 

Arithmetic means that the extra £75 matters a lot less than an extra 10bps or so for the wrapper as you climb the portfolio ladder. Whether you think a vanilla on-platform pension wrapper should command a premium at all is a different matter!

So here ZIP loses out to Skandia a bit and will also look seriously pricey next to AJ Bell and the lower cost guys. Importantly, though, it’s considerably cheaper than Standard at all points and also takes a good slice out of AXA. So across pension and ISA, say, the real charge a client pays is likely to be quite a bit less on ZIP than the other FNZ platforms. But it’s still quite a bit more than you’d pay on many others, so it’s all about how much extra a client could/should be expected to pay for an FNZ underpinning, I guess.

 

Aviva update – the new pension wrapper price is now released and we’ve used those charges here. It’s 40bps up to £20k (edit: per Phil’s comment below this should be £25k, the figures in the table are right, sorry for the typo), 35bps up to £250k and 25bps above that. Drawdown is £100. That’s a good price although they could have done even better by flattening it down further in line with their stated mid-market aspiration. But they’ll show well on revised tables and when you mix in ISA/GIA at 25bps they’re certainly one of the lowest cost overall.

 

That’s a brief canter, conclusions are that ZIP looks good and I’m sure it will work well. A great deal of care has gone into it and it must be a huge relief to the team to have it out there- congratulations to them. There are some limitations, but not many. The price is only so-so and certainly not good enough for cut-through across the market generally. But the Zurich chaps aren’t daft and must reckon they can get it away at this price. The issue, I guess, is whether the market really wants another platform of this type, with the same functionality and the same charges, but a different front end. Time will tell.

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About Mark Polson

lang cat founder and boss. Expert on all things platforms, pensions and investments. Prolific writer and public speaker, even when people ask him not to be. Knows more about Scandinavian black metal than you, and isn't afraid to prove it.