The Royal London platform announced last week that it will overhaul its fees to introduce an “all in” pricing structure where clients will be charged a single standard account fee and will not be charged for any additional trading or services.
The structure, which is set to come into effect on 1 May, is designed to make the total cost of ownership easier for advisers and clients to understand without having to worry about additional costs accumulating over time.
However while some costs have been scrapped, those with up to £1m on the platform will see their standard charge increase by 0.05 percentage points.
Abraham Okusanya, director at research firm FinalytiQ Limited, called the move “a step in the right direction” for platform fees as it clarifies what users of the platform are paying for.
“The new structure is much simpler and easier for advisers and clients to understand,” Mr Okusanya said.
Whether the new structure will make it cheaper for advisers to use the platform depends on how it was used in the first place.
Under the new charging rules advisers are charged one flat fee for their entire use of the platform, whereas before they were charged for individual transactions.
Mark Polson, principle at research firm the Lang Cat, praised the charging structure change as it sees Ascentric move from “possibly the most complex structure in the market to one of the simplest”.
Mr Polson added the move brings the platform back to the true meaning of a wrapper and allows advisers to focus on their investment and tax planning strategies rather than worrying about additional costs.
“Probably the most interesting thing for me is that the structure is now flat across not only all wrappers but also all investment types.
“Very few platforms do this, but to me it is the closest thing we have to the original intention of a ‘wrap’ – that is to say an environment in which advisers can implement their tax planning and investment strategy without worrying about whether one route or another costs more.”
Fees charged will now depend on how much the platform is used, with a 0.3 per cent charge for assets up to £1m, 0.1 per cent for assets between £1m and £3m, and 0.06 per cent for assets between £3m and £5m. Terms are available on request for assets of more than £5m.
Previous charges that have been removed include a £20 fee per trade, up to £60 per year to invest in its model portfolios, a £150 annual charge each on self-invested personal pensions and drawdown, and a 0.5 per cent charge levied against individuals who used the wholly intermediated platform without an adviser.
The platforms business is a notoriously difficult one in which to make profits, but both consultants were confident the change would not have a dramatic impact on Ascentric’s profitability.
“In terms of profitability, I don't see this making a huge difference to Ascentric's bottom-line. The key challenge is for the platform to reign in its cost base, which has spiralled no thanks to its drawn-out re-platforming project,” Mr Okusanya said.
Mr Polson said percentage-based charging structures tend to favour providers over time, as stock markets rise and account balances increase.
“I don’t think simpler structures necessarily reduce margins for providers – in fact it may be the other way around. But I do think that we are seeing a wave of pricing changes which providers are trying to characterise as sustainable – in some cases bucking the overall downward trend of pricing.”
julia.faurschou@ft.com
