Alliance Trust takes steps to flat fee model

Daniel Liberto

From 1 February, annual administration fees for Isa/Investment dealing accounts will almost double by £35 to £75, while charges on the investment company’s Sipp product will increase by £20 to £155. Alliance Trust said its commitment to transparent flat fee models, together with feedback it has received from its clients resulted in the move to a single, all-in-one administration fee.

The new fees, according to the investment company, will include ad hoc activity, such as corporate action fees and cash withdrawals on non-Sipp accounts, which were previously charged separately.

Online and offline dealing fees, meanwhile, remain unchanged and fees on child accounts have been frozen.

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Alliance Trust, which wrote to its 57,000 customers over the festive period to explain the extra charges, has also removed its shareholder discount and replaced it with a tiered loyalty discount scheme.

Patrick Mill, managing director for Alliance Trust savings, said: “We believe that customers will understand that these price increases are necessary in order to ensure we maintain consistently high standards and quality of service.

“We are also making a commitment to our customers that we will not make any further increases to our charges until 2016 at the earliest. Nor will we increase the online or offline dealing fees.”

Mr Mill added that the changes were made now in preparation for the tax year end when people often review their finances and make investment decisions.

Regulatory changes, he said, are likely to force a number of providers to make their charges more transparent and Alliance Trust was keen to keep clients updated at the earliest possible date.

Provider view: Patrick Mill said: “We remain fundamentally committed to a transparent flat fee model as the value of an individual account does not change the cost of administering it. We believe percentage charging structures are simply a tax on wealth. However, we have listened to feedback from our customers about the service we provide, our online service and the ad hoc charges that we apply to their accounts. Based on this feedback and the increased demand on our business, we have decided to move to a single, all-in-one administration fee which covers all regular activities customers carry out on their accounts.”

Adviser view: Claire Walsh, IFA for East Sussex-based Pavilion Financial Planning, said: “I think that long-term the movement with fees is down not up, but then most work on a percentage rather than a fixed fee. As long as providers are, as this says, ‘transparent’ on fees, I think it is fine and the fees below are still quite low provided someone has sufficient level of capital, which most advised clients do so as to make this charge very small as a percentage.”

Charges: The new flat fee administration charges are £18.75, plus VAT, each quarter on Isa/Investment dealing accounts and £155 a year, plus VAT, on the Select Sipp.

Verdict: News of price hikes will come as a blow to savers, but is likely to become an industry trend in the next few months as other fund supermarkets come to terms with transparent charging structures. Whether Alliance Trust Savings’ products are still favourable to clients will largely depend on the sum invested and what its main competitors plan to do when they leave the old model.