The Lang Cat has got amongst the platform pigeons again, rating the various market players in terms of pricing, with Standard Life, Transact and Novia all coming out as the least competitive.
Despite the consultancy’s report revealing an 18 per cent pricing drop over the “turbulent” last five years, it noted that the “widely predicted” levelling out of custody costs at 0.15 per cent in the future is unlikely.
That would require a 57 per cent drop in the existing market rate, which the Lang Cat pointed out would mean significant cuts in already thin margins.
“The margins left for continued price cuts are not huge – there’s a fine balance on display,” read the document, adding that profitability is too precious to gamble and commercial wiggle room is not at a premium.
“Looking at 2013 specifically, our peer group derived around £60m profit from revenues of around £900m. A drop of anything around 5 per cent of revenue or above would all but wipe out industry profit.”
It suggested that moderate reductions are likely, settling on somewhere around 30 basis points in five years and 25 basis points in 10 years.
As for the actual wraps involved in the study, the Standard Life Wrap’s less expensive core charging structure was still deemed “not cheap” at 45 basis points for a £200,000 self-invested personal pension.
It added that Standard Life Savings continues to make losses – although they are getting smaller – and the desire to reach sustained profitability will be a factor.
David Tiller, head of platform and wealth propositions at Standard Life, told FTAdviser that this hammers home the point that platforms are not the same.
“Standard Life Wrap is focused on delivering the best possible service to support sophisticated wealth management and financial planning; advisers are the true judges of the value of a platform.
“I doubt our platform could have achieved the level of growth and independent recognition it has if the advisers who select our wrap did not consider it competitively priced with similarly rich propositions targeting the same segment of the market.”
Novia was deemed “pricey” at a starting rate of 50 basis points. “It has steadfastly – and admirably – held firm, but it must feel under pressure,” stated the research, adding that the platform looks “ripe for a re-price”.
Bill Vasilieff, chief executive at Novia, also stated that not all platforms are the same and therefore cannot just be compared on price. He also took issue with the research’s findings that while £100,000 was the most commonly held portfolio size, the average portfolio stood at approximately £190,000.
“Their view on price points is completely wrong, our average is around £100,000 so that means that there are a lot of people with portfolios well below that level,” he argued.
Transact meanwhile “has always been unashamedly expensive at the low to medium end” according to the report, with the awards to back up a “premium service for a premium price” position. Transact declined to comment.