Patrick Mill, managing director at Alliance Trust Savings, is proud to state that the platform was “doing RDR before RDR was invented”.
Indeed, the key strength of the proposition is the way it embraces the central principles of the retail distribution review: fairness, transparency and choice. It has a proud heritage of conducting itself in an open and honest way, putting the customer first.
As Mr Mill says: “ATS was set up 26 years ago, principally to allow shareholders of Alliance Trust to reinvest their dividends. It has developed to became a standalone business to which we have added a number of different investment types to make the platform what it is today
“What ATS has always been about is transparency and fairness. We have always thought that was right for the end customer. We have never offered commission to advisers and have only ever done adviser charging. What is more, we have always been transparent with our charges and they have gone straight to the customer, so any rebates we have received from fund groups have always gone wholly back to the customer.
“We have also moved to using clean share classes with our funds. So while on other platforms you may pay 1.5 per cent as an annual management charge and then may or may not get a rebate at some point in the future, the majority of our funds are at 0.75 per cent with no rebate. We then make our charges on top of that.”
For sales and marketing director Garry Mcluckie, the aim now is to make sure both advisers and consumers are aware of what ATS can offer them and how it differentiates itself from other platforms. He believes this message is clear and compelling, with new business driven by individuals looking for three factors: investment choice, transparent charging and value for money.
“In terms of investment choice, we offer a much wider range of investments than most platforms offer today,” he says. “We offer investment trusts, ETFs, ETCs, shares on the London Stock Exchange, as well as 18 foreign exchanges. Given that the FSA has made it clear to advisers that they must consider the full range of investments, it sets us apart that we have a whole-of-market approach. It is something we have a long background in and do extremely well.
“We also sell a lot of passive funds and in this area in particular our way of charging is very attractive. If someone is paying 20bps for a passive fund, they will not want to then pay 35-50bps for a platform charge. It is counterintuitive. People buy on our platform as the fees are low and it makes it a cost effective way of investing in a low cost market. ”
Meanwhile, ATS insures that its charging structure is both transparent and fair by, in the first instance, using clean funds and, second, by implementing a flat fee rather than taking a percentage. In that way, customers will always know what they are going to be charged upfront and can also rest assured that amount is not going to rapidly increase as their portfolios grow.
“In line with our ideas on fairness, we see ourselves as an administrative service, or a facilitator and should, therefore, be remunerated as such,” adds Mr Mill. “The adviser or end client wants to do something, they tell us and we physically make the transaction for them and charge them for it. There is a fixed fee for an ISA or SIPP, for example, and then if they buy or sell something then we charge them for that. However, there are no basis points charged, like with other platforms.
“If a client is investing £20k or £100k, the administrative work is exactly the same for us and so why would we charge differently. Flat fees are, without doubt, best for clients. That way the client has a known charge and, even if they do not start off with a huge amount – perhaps just using up their ISA allowance each year – they can be confident that as their portfolio grows over time, the charge is not going to increase with it. It is not just of benefit to people with larger pots to start with.”
To illustrate his point, Mr Mill states how, in January, the market went up by 7 per cent. In line with this, platforms will have seen their revenues increase by the same amount over that period. However, they have not operated any differently over that time, have not carried out any additional administration or services and, therefore, according to Mr Mills, cannot justify that rise.
“Further, we made a conscious decision to go straight out with clean funds,” adds Mr Mcluckie. “We believe in transparency and, if we were able to do it, why wouldn’t we offer clients funds at 0.75 per cent, rather than the convoluted way it has been done in the past, when they paid 1.5 per cent and then waited an indeterminate number of months to get a bit of it back. Added to that is the uncertainty as to whether the HMRC is going to tax that rebate as income, as well as people advocating unit rebates, which play no part in a transparent world.”
In terms of value for money, the RDR has helped create a world where charging has been fully unbundled for the first time and, therefore, customers will increasingly be questioning the cost of services and demanding more for their money. By implementing a clear and transparent structure from the outset, ATS can stand up to this scrutiny without having to make any changes to its core business model.
Mr Mill says: “We have not seen the RDR fully hit platforms yet, however it is not under dispute that there will be a need for increased transparency and those platforms that have relied on rebates from fund groups to drive their revenues will have to find other ways of operating. We are bound to see platforms evolve as they settle down in the newly transparent world.
“We firmly believe consumers should understand what is going on in the marketplace. With some platforms retaining £750 from the cash rebate for every £100k that is being invested, that is a lot of money that the consumer is highly unlikely to have paid out had they been aware what they were paying for.
“Meanwhile, at ATS, because we have a straightforward and honest way of working and a flat fee structure, customers know what they are getting. When you are assessing the value of our competitors, for clients with higher value assets in particular, the costs can get quite significant if you are paying 40-50bps for a fund that is worth, say, upwards of £200k. It is hard for anyone to justify that cost to the end client.”
Overall, both Mr Mill and Mr Mcluckie welcome the RDR, not least because it neatly highlights the strengths the ATS proposition has inherent in it. They acknowledge too that they stand to benefit as advisers are actively encouraged by the regulator to consider multiple platforms to meet specific client’s needs. With the choice of platform considered, in itself, part of the advice process, they anticipate an increase in business as more advisers become aware of what ATS can offer their clients.
“There is the potential for a lot of growth in the platform industry, but also platforms operating differently and both advisers and clients having new expectations of what they should offer,” Mr Mill concludes. “We are lucky to have a platform that is one step ahead of these regulatory changes, with transparency and fairness woven into the fabric of it.”
