Well, here we are on the last day of 2013 and I’m writing about platform pricing. Plus ca change, and all that.
Our subject today – and I’ll be brief – is Alliance Trust Savings (disclosure: ATS is a client of the lang cat), which has hiked its price for both advised and direct customers. Now, I’ve been writing for a long time about how stupidly cheap ATS’ flat fee proposition is for larger portfolios when compared with the ad valorem boyz. I regret to say someone might have been listening, because from 1 Feb 2014 it will be less stupidly cheap.
Before we get into the tables, let’s look at the quantum (posh) of the increase. The news isn’t all that pretty. SIPP clients are seeing a 10% – 15% rise, which obviously ain’t great news, but isn’t a killer. ISA clients aren’t faring so well, with a juicy 87.5% hike for ISA/IDA holders on the standard option and 50% on the IFO version which is only available to advised clients (all these figures include VAT). Bearing in mind that if you hold 3 wrappers, you pay 3 charges, some investors could be seeing an extra Â£125 or so being pockled by the Dundonian stalwarts. These charges are guaranteed until 2016.
So notso hotso, then. However, as so often is the case, there’s a bit more going on than meets the eye. ATS has always had a bit of an easy ride in the lang cat’s tables (and other comparison systems) because so many of their charges are event-driven. Want a corporate action processing on your account? That’s a charge. Want your money out? Charge. Scratch of the left buttock instead of the right? Charge. And so on. But with this reprice, a decent number of those charges have been consolidated into the annual management fee, so (according to ATS) you can be confident that this fee is pretty much all you’ll pay – outside of trading on the standard option – in a typical year. We don’t have space here to pull that apart, but I’m minded to take ATS at its word here.
I mentioned trading, and this is ATS’ soft underbelly on the standard option. Â£12.50 a shot is now looking seriously pricey. AJ Bell has redefined what trading charges should be (for those that charge them) at Â£5 a trip. So a switch with AJ Bell is a tenner, but it’s a pony with ATS. Try that over a 10-fund portfolio and it soon mounts up. As we’ll see in a moment, the hike in annual charges ain’t really no thing, but this trading charge needs some attention. For balance, the IFO option now includes an extra 5 trades a year – 25 instead of 20, but we hear ATS isn’t too precious about this; it’s there to pick up day traders and other ne’er-do-wells.
Finally, before the tables, a word on timing. I think ATS will pick up some flak for bumping prices (or communicating it) around Christmas. I think that’s unwarranted. There is no good time for this stuff, but ATS has been pretty straight here. It’s important that investors and advisers know the score before the crucial Q1 business period and tax year end in particular. I know ATS pretty well and I think the guys there do try to do the right thing. The easy thing would have been to wait for Hargreaves to announce its price and then go, but with the Bristolian behemoth hanging on for the last possible moment that would have meant lots of investors piling in in Q1 on the basis of charges which the company knew would change. Do I like the price hike? No. Do I think ATS has gone about it the right way? Yes. Do I use rhetorical questions too much? Certainly.
As ever, we’ve included a trading charges allowance for those that have them (mainly ATS, AJ Bell and Ascentric here). What do we see? Well, you’d be nuts to use either of the ATS options for Â£20k ISA clients. No prizes for guessing that. At Â£50k ATS is no longer a price leader; it’s just in the pack (albeit towards the front). Care is needed at this portfolio size though with the standard version – regular traders will be much better off with Aviva or one of the all-inclusive lot. But from Â£100k up, the normal order reasserts itself, arithmetic does its thing and ATS returns to the front. And by the time you’re up at a Â£500k portfolio, it’s 3 or 4 bps versus 21 with AJ Bell. So not that big a deal.
Same sort of deal here, other than it’s Nucleus and FundsNetwork’s new pension offering which take pole position up to Â£100k.
It’s worth saying that if you do hold multiple wrappers then the situation looks different – a little worse – for ATS. We’ll do more analysis on that for subscribers.
But the big change here, really, is that ATS is probably no longer so much in the hunt for sub-Â£100k SIPP business on a price basis (yes, a 5bps difference at Â£50k will do that to you). It’s absolutely back in its usual spot at the Â£100k mark, and by the time once again you’re up to half a mill then it remains by far the cheapest option.
To conclude then, if you’re an investor with a small portfolio, maybe Â£50k in a pension and Â£30k in ISAs or whatevah, your adviser will probably point you away from ATS. Frankly, in this post-RDR world you’ll be doing well to find an adviser who’ll deal with you anyway, so kudos for that. If you’re a well-upholstered feline, ATS remains as compelling a choice on cost grounds as ever it did. To be honest, it was probably too cheap. ATS has a lot of work to do in terms of basic functionality; my hope is that this will allow them to get that done and deliver more of what advisers really need.
And with that, we’ll see you for more pricing fun in 2014. Slainte mhath.