Schroders Personal Wealth, which is a joint venture between the asset manager and Lloyds bank, is launching soon with a fee level that appears to be less than half that of St James's Place, leading some to speculate over an impending 'price war' between the advice giants.
Research by SPW, seen by FTAdviser’s sister paper the Financial Times, put SJP’s advice fees at 7.95 per cent for the first year and 2.95 per cent for later years, while SPW expects customers to pay about 3.65 per cent of their total investment in their first year before total fees drop to about 1.9 per cent.
Although SJP has since branded the figures inaccurate and a “wholly misleading” misrepresentation of its charges.
Advisers have already dismissed the so-called ‘price war’ as being “irrelevant” to the wider advice market, saying good financial advice was accessible at lower prices.
Ms Ransom, who recently completed the latest fund raising round for DFM business Netwealth, raising capital from city veterans Michael Spencer and Edward Bonham Carter, agreed.
Ms Ransom said: “There are essentially two types of firms in the wealth management market.
"The robo-advice firms are essentially creating a new market, catering for people that didn’t know they needed advice, and who have small pots of assets and quite basic needs.
"But the robo-advisers can’t cater for bigger portfolios and bigger needs. The other part of the market are the incumbents, and they are overpriced and lack transparency about where your money is.
"The incumbents are hamstrung by having very expensive offices and very old technology. That’s why when I see it reported that Schroders Personal Wealth are charging less than St James's Place and it is described as a price war I think it’s laughable.”
Netwealth uses active asset allocation but invests in passive investment products, and Ms Ransom believes this, combined with the fact the company doesn't employ a lot of sales people instead winning clients via referrals, means the firm has lower costs.
Netwealth charges a 1 per cent fee, which drops to 0.85 per cent when a client has assets of £500,000.
The average client on Netwealth has over £400,000 in investable assets.
Ms Ransom said: “While the average age of a wealth management client in the UK is in their 60s, we have a lot of clients in their 40s.
"They are very comfortable with technology and want to use technology, and we allow them to do more of it themselves, probably a lot more than with some of the incumbents in the market, so we have fewer humans and more automation, which of course makes it cheaper.”
The firm launched a model portfolio service in May, which is targeting the adviser market.
Other than that the company offers general investment accounts, Isas and pensions managed on a discretionary basis.
In the year to the end of March 2018, the company reported a loss of £4m.
But in the most recent fundraising round it raised £10m, half of which came from Icap founder Michael Spencer.
Mr Bonham Carter took part in the funding round and is also a director of the company.
The company’s chief economic strategist is Gerard Lyons, who joined the firm having previously been Economic adviser to Boris Johnson, when the latter was Mayor of London.
david.thorpe@ft.com
