7IM scraps VAT from model portfolio services

7IM scraps VAT from model portfolio services
Credit: Chris Ratcliffe/Bloomberg

Seven Investment Management has ditched value added tax from its model portfolio service, becoming the latest in a string of providers to scrap the bill for clients.

The fund house announced today (January 13) it will remove the extra tax charge from February 1, dropping the cost of its active and passive MPSs to 0.25 per cent.

7IM’s bespoke model portfolios now cost between 0.25 and 0.3 per cent while the price of its 7IM Pathway model portfolio range, which does not use tactical asset allocation, remains at 0.15 per cent.

The price changes apply to portfolios on both the 7IM platform and third party platforms.

7IM’s model portfolios aim to provide advisers with a range of ready-made diversified multi-asset investment solutions, based on its three stage investment process: strategic asset allocation, tactical asset allocation and robust risk management.

Verona Kenny, managing director of intermediary, said: “The removal of VAT will make our already competitively priced model portfolio service even more compelling for advisers, and importantly will provide a direct benefit to end clients.

“Despite challenging conditions, we have continued to innovate and enhance our proposition to respond to the needs of advisers and their clients.”

Over the past year, 7IM has reduced the charges on its Sustainable Balance fund, launched its low-cost 7IM Pathway funds and deployed various platform upgrades.

The VAT scrapping trend

The question of whether VAT should be levied on MPSs surfaced last year when the taxman ruled Tatton’s MPS was exempt from the tax.

Other companies — such as Brewin Dolphin, AJ Bell, Quilter, Investec and Brooks Macdonald — have since followed suit.

Most DFMs are seeking an individual ruling from HMRC on whether VAT is payable on their MPS, though the taxman has now told multiple firms to ‘self assess’ the situation.

MPS fees have seen downward pressure in recent years, with firms charging as little as 0.15 per cent, and as DFMs across the market look to knock VAT off the price the average price is likely to slip further.

The trend has triggered experts to encourage advisers to check the amount of cash they were forking out for DFMs, with some saying it was likely some DFMs were levying VAT on their service just because it was the norm.

It also rekindled concerns that with many DFMs adopting a centralised MPS, advisers needed to understand whether they were offering a truly discretionary, bespoke service to the client.


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