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.
And here’s 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.
- SUPERCLEAN™ to 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.