Yeah, sorry about that.
So it’s been a while since I wrote here, which is daft, but no-one said I was smart. Anyway, I wanted to rekindle the blog a bit, so you’ll have to put up with it, unless you stop reading here, when you won’t. So that’s all good.
Skandia Old Mutual Wealth (OMW; which my phone insists on auto-correcting to a jaunty ‘On My Way!’ – grrrrr) yesterday got freaky with the tweaky and announced two new tweaks to its charging structure, just too late for our new advised platform guide, The Value of Nothing, which is available etc etc. Here’s what it did:
- a removal of the £100 (well, £99 and change) annual minimum charge
- a removal of all drawdown charges.
We’ll do them in order. The removal of the minimum charge is more a symbolic thing than anything else. It only kicked in below assets of £20k or so, and that’s not enough to trouble most clients of advisers. However, the principle of a provider making their proposition so punitively expensive for smaller investors on the basis it didn’t suit them commercially never sat well with me, or with many others, and really if SkandiaOldMutualInvestmentWealthSolutions didn’t want smaller investors it should have set a minimum investment size and have done with it. So this is a welcome correction to an anomalous structure and should, I expect, remove a couple of red lines on a TCF report somewhere. On My Way! – dammit – OMW is still a relatively expensive place to put a £10k ISA, so I shouldn’t imagine there will be many regrets.
We’d normally publish new heatmaps when there’s a change with a big provider like this, but there’s no point really as our ‘maps start at £20k and it’s only below this that it makes a difference. So if you’ve got the new Guide – and if not then shame on you, go here to sort that out – it’s as you were in terms of the competitive position.
Much more interesting is the removal of drawdown charges. Again, we’ve got an in-depth analysis of drawdown in the Guide, but one of the points we make is that the new price benchmark for getting your money back out again (GYMBOA, you’ll be reading it everywhere soon) is zero. Zero is what Aviva and FundsNetwork charge. It’s what Nucleus has always charged. And now it’s what OMW charges too.
This is good. Generally speaking, it’s normal practice in providers to soak those with the most money (those in later life who’ve accumulated wealth) for the most in charges, either on a percentage basis or through fixed activity fees like drawdown. But the technology behind platforms, even the more bare-bones efforts, is generally capable of paying out income on an an automated basis. Additional admin is generally down to inefficiency or user error (some complex cases aside) and, of course, it’s the client’s money anyway and why should they pay more to get it back out a bit at a time?
Behind the scenes somewhere is a spreadsheet postulating that although there will be a loss in drawdown revenue, this will be more than made up for by increased persistency (keeping money on the platform longer) because advisers will not transfer clients away just pre-retirement to access lower charges, especially for multiple crystallisation scenarios.
I don’t know if that spreadsheet is right: it doesn’t matter, really. A decent whack of the market now allows investors to access their own money without paying extra for the privilege, and that’s to be applauded.
If we must put up with ad valorem charges, then the least the providers charging them can do is to be gracious enough to treat them as an all-included feast. And that means resisting the temptation to bilk those in their third age.