Transact cuts buy commission threshold to £100k

Transact cuts buy commission threshold to £100k
  Lang Cat founder Mark Polson said he'd much rather see Transact remove this 'anachronistic charge' completely to bring it in line with the market

Transact is to lower its costs further for smaller portfolio holders by cutting its buy commission exemption threshold from £200,000 to £100,000 later this year.

In an email to advisers last week (January 20), Transact said the changes will come into affect from March 1.

The platform said the change means "better value for smaller portfolios" and that more clients will pay no buy commission on purchases.

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Alpha FMC’s head of retail distribution and advice, Bradley Northrop, said Transact cutting costs for smaller client portfolios has been a sustained and consistent strategy over the past 10 years in an effort to pass cost savings into customers as the platform has scaled.

"The threshold for the buy commission has come down from £2mn in 2014 all the way down to £100,000," he explained.

"Most platforms don't charge a buy commission so you could argue a more significant move would have been to eliminate this charge all together - particularly with consumer duty placing a greater focus on value. That said the numbers are relatively low and impacting a finishing number of customers."

Northrop added that consumer duty will prompt platforms to review the fairness of the pricing tariffs and the different treatment strategies employed.

"Wrapper fees are likely to come under scrutiny also. What's key here is the complexity of the pricing model, having lots of different pricing levers eg, platform fee, wrapper fees, buy commissions and dealing costs, makes it difficult for advisers and clients to understand what they are being charged and for what," said Northrop.

"We do see a shift in the platform market with those platforms that are able to reward scale being able to offer more attractive pricing to help attract the intergenerational wealth opportunity, with the use of family linking also."

Transact is one such platform which offers family linking. Its new buy commission threshold applies to individual portfolios and linked family groups.

Founder of the Lang Cat, Mark Polson, echoed Northrop, saying Transact has "salami-sliced" its charges down over many years, meaning it’s now moved from being a super-premium priced platform to much more on the market.

"If we’re honest, its [Transact's] structure hasn’t ever been great for less affluent investors compared to more aggressive competitors and this reduction in the trigger level for where buy commission is removed is a welcome step in the right direction," said Polson.

"However, we’d much rather see Transact remove this anachronistic charge completely to bring it in line with the market, and can’t help feeling that, say, a £10,000 fund deal costs Transact the same whether a client has £99,000 or £101,000 invested.