According to a number of headlines across the trade press, there is a war going on in the platform sector. As yet there have apparently been no casualties, though this is expected to change.
The internecine conflict is one of price: as we approach the implementation of the regulator’s cash rebate ban, providers are coming out one by one with new fee structures, each more ostensibly - and perhaps self-defeatingly - altruistic than the last.
Most of this has so far been contained to the non-advised sector. So we had Hargreaves revealing its own long-awaited pricing shake-up, with Fidelity coming out a week later with a model that offered discounts across tiered headline rates and charged for fewer ad hoc items.
Barclays came next - and again the bar was lowered further. At the time of writing, a press release relating to Bestinvest’s new charging had just landed in my inbox which boasted that the firm’s fees “significantly undercut” rivals.
The problem, as was articulated by many commentators with an axe to grind in the wake of Hargreaves’ announcement, is that the platforms are fighting over the title of ‘cheapest’ by competing on core admin charges or fighting over who has negotiated the largest fund management discounts.
The reality, as our investigation earlier this month revealed, is that this is not the only way platforms make money out of clients.
Our research found that 10 out of 13 platforms questioned were taking a cut of interest offered on client cash accounts, with seven offering a rate lower than the Bank of England base rate. This is in addition to the cash administration charges many also levy.
And beyond this many providers will charge for dealing in paper or over the telephone, switching funds or undertaking any transaction, exiting the platform, and so on. Most will charge some but not all of these fees and there is no consistency across the sector on whether they are percentage-based or fixed costs.
Each and every platform that has ‘entered the platform price war’ has sought to present its charges as the lowest on the market. The lack of transparency inherent in this complex cornucopia of fee elements means ultimate charges paid can be hard to discern and will depend largely on how much a particular client is investing - and what they are investing in.
When Alliance Trust revised its model for advised and direct clients at the beginning of the year, consultancy The Lang Cat said the effective 87.5 per cent hike for self-invested pension wrappers meant it was no longer “in the hunt” for sub-£100,000 clients, but that post-£150,000 it likely remained the best option.
Similarly, FTAdviser revealed this week that Aviva had revised its pricing by introducing a new tier for those with more than £400,000 to invest, which was geared specifically to making it a more economic alternative for advised clients with large accumulated savings pots.
Under the new model, investors with £400,000 or more will pay 0.15 per cent for their Isa and investment portfolios, while those in pension portfolios will pay 0.10 per cent at Aviva’s ‘core’ level - which comes with a 0.05 per cent discount - and 0.15 per cent at its ‘choice’ and ‘flex’ levels.
It is refreshing to see a platform being open about where its sweet spot is, because the truth is all platforms will have one.
While we’re on Aviva, they were one of the three that do not withhold any cash account interest. Looking at their fee schedule, there is also no cash admin charge or other ‘hidden’ fees relating to paper or telephone dealing, for example.
True, Aviva’s cash interest rate is not the highest available at 0.5 per cent. Neither, for that matter, are its admin charges the lowest available for many clients: at 0.35 per cent most of the big providers in the sector would out-gun them for smaller-pot investors.
But for a particular group of clients, Aviva is likely to be the ideal choice. If more platforms ended hostilities and were equally as transparent with their charges, we might see others settling into a similar segment specialism.
At least then we’d all know where we stood.
