Fixed in their ways
Talking of choice, question time at the tours I’ve been doing have tended to slide back to the old questions – ‘does a tree falling in the forest make a sound if there’s no one there to hear it?’, ‘would you rather fight a horse-sized duck or a hundred duck-sized horses?’, ‘how many platforms do I have to use to be independent?’, and ‘how low will platform fees go?’.
The last of these has been on my mind recently as our good friends up in Dundee, Alliance Trust Savings, have released their 2018 figures as they prepare to become part of Interactive Investor.
First things first, in the direct investing market there are plenty of fixed-fee platforms. In adviser land there is only one, and that’s ATS. That fixed fee shape makes it very cheap for larger portfolios, though not so great for pots under £50,000, or maybe a bit more.
The thing with ATS is that it’s had a really tough couple of years. The integration of Stocktrade at the same time as doing a big replatforming away from its proprietary ActiveBank system on to GBST Composer was, in retrospect, a bit much to swallow and everything went a bit awry for a while.
The good news is that it’s returned to profitability – a swing of almost £20m from the previous year – and its complaint levels have dropped by 76 per cent, down to a level that most platforms would regard as normal, and which are non-reportable (if your complaints get too high you have to put your hand up to the regulator and bring your own naughty step to sit on).
This is good to hear, because the real answer to how low fees can go lies in some element of fixed-fee proposition, and we need someone to be showing us all how that works. Just to illustrate, ATS’s fixed fee for a £500,000 self-invested personal pension with a 20-fund model portfolio, rebalancing quarterly (ha!) comes out at 0.09 per cent a year, or about a quarter of Transact.
Now cheap isn’t good enough; it has to work. ATS has been hammering away on getting back to a state where that’s true. But the answer to the question on how low fees can go will depend on whether advisers will go for something like this, and perhaps accept that some of the more appealing stuff won’t be there. It’s worth saying that we don’t know what II’s plans for the advised part of ATS are yet.
These aren’t new arguments, of course, but at some point someone will do something that is both very low cost and works perfectly well. It might even be that Mifid II will drive companies to simpler investment solutions that require fewer bells and whistles, and can be housed without the need for more complex technology.
