The cost of investing has fallen over the course of 2014, with prices settling at around 0.35 per cent for those charging a platform fee, with an increased number offering fixed price models, a survey has revealed.
Data from the Platforum’s fifth annual report revealed that the cost of fund management via direct platforms has also fallen slightly, with some super-clean share classes available on selected platforms and a general reduction in charges for passives.
Jeremy Fawcett, head of direct at The Platforum, said that while he does not anticipate huge platform pricing changes in 2015, there will be adjustments, as several platforms have told him that they will be reviewing pricing.
“Although a low margin environment, some platforms have hinted to us that there is still room for maneuver,” he added.
Since the last report there have been further reductions in platform charges from Axa Self Investor, Barclays Stockbrokers, TD Direct Investing and Willis Owen.
“In addition, some platforms have successfully negotiated exclusive deals for their clients with a number of fund managers – most notably Fidelity Personal Investing and Hargreaves Lansdown – bringing the overall cost of investing down,” noted Mr Fawcett.
Speaking to FTAdviser, CWC Research’s managing director Clive Waller, confirmed that the typical platform cost is around 0.35 per cent, while total asset management costs can exceed 3.5 per cent with trading and communication costs.
“Few platforms are making real money, so movement is likely to be tweaking for competitive advantage.
“A real change would only occur with an aggressive new entrant with clout and a different model, if someone like Google did that, there would be tears; that’s unlikely though in short to medium term.
“Big cost savings will come purely from industry efficiencies. Advisers are grossly inefficient - face-to-face fact finds at full adviser fees are a great example should be automated - while asset managers have huge margins and many don’t use technology effectively.”
The amount of savings held on platforms grew to £132bn last year, up 13 per cent from 2013 to £31,700, although this was below the typical 20 per cent year-on-year growth.
Some other trends included self-invested personal pension assets now making up 20 per cent of assets on direct platforms, up from 17 per cent two years ago, while the average age of a direct to consumer investor is 56.
Looking ahead, the soon-to-retire population demographic is promising, with 55–64 year-olds being the most likely to actively manage their investment, with 23 per cent planning to take income as a DIY investor, according to Platforum research.
“We expect a new cohort of first time investors, aware of the vanishing state retirement safety net, and empowered by the internet,” commented Mr Fawcett. “Equally, the retirement market provides the most promising area for growth.”
The report added that life companies are likely to launch more platforms and pick up business from pension savers who do not want to buy annuities.
peter.walker@ft.com
