2017 has seen a flurry of movement on the pricing front with seven platforms amending their pricing models. Despite this activity, average charges have remained constant from August of last year.
The current situation for platform charging is as follows:
- Average effective rate for a £100,000 portfolio is 0.41%
- Average effective rate for a £500,000 portfolio is 0.29%.
Source: Platforum UK Adviser Platform Pricing Guide, October 2017
But what are some of the key trends which will have an influence on platform pricing moving into 2018?
Scale – an enabler of lower costs
There was much discussion at Platforum 2017 about using scale to bring charges down for the end consumer. There has also been clear regulatory scrutiny on value for fees charged. Transact and Nucleus are both platforms that have lowered charges for certain customer segments as a result of increased scale.
Aegon has committed that no Aegon or Cofunds customer will see an increase to their charges post-integration. We think that going forward, the combined platform will operate on Aegon’s capped charge model.
Which fee model wins?
With advisers and clients becoming increasingly cost-sensitive, there is a place for platforms offering flat rate fees or capped charges.
Alliance Trust Savings remains the sole proprietor of the flat rate fee amongst adviser platforms. Aegon’s charge cap equates to the same for portfolios larger than £250,000 and Hubwise has launched with a low-cost, capped pricing structure.
In the direct platform space, Interactive Investor announced this week their revised flat fee structure. It is now the second largest direct platform following the TD Direct Investing acquisition and this week’s announcement of the acquisition of their white-label partners. It will be the first scale player to be running on a flat fee model.
The impact of new entrants to the market
Hubwise relaunched its platform in July and Embark plan to launch their new platform at the end of 2017. Both platforms want to position themselves as ‘disruptors’ on pricing. Vanguard launched its direct offering in May at 0.15% and have attracted £253m in five months.
Both Hubwise and Embark will look to differentiate on price, but it remains to be seen at what pace they will be able to accumulate assets from the adviser community and whether the incumbents will be impacted by cheaper competitors.
Platforum data show that advisers hold 40% more assets on their primary platform than on their secondary platform. Platforms clearly want to move their secondary and tertiary users up the value chain to capture wallet-share. We could see more platforms experimenting with fee structures to achieve this aim. Making charges for larger portfolios that bit more competitive may be the go to strategy in 2018.