Bill Vasilieff: Why platform experts are wrong to focus on costs


Another week and no doubt another industry consultant or ‘expert’ on platform pricing telling us all how expensive we are and how we should move to a flat pricing structure because it’s cheaper.

It is interesting to see that the blogs almost always have comments from advisers stating that choosing a platform is about much more than price and not all platforms are the same – much as platforms argue.

But the consultants keep on about price. Maybe that’s because it is easier, but if it is, they really should get their facts straight.

A couple of recent studies claimed that appropriate price points at which to compare platforms were at a low of £100,000, an average of £200,000 and a high of £500,000.

The average client portfolio at Novia is around £100,000 and other platforms I have spoken to give a highest average of around £130,000.

And that is the mean. The median on the Novia platform is much more like £50,000, so the low pricing point used for studies should be much more like £25,000-30,000.

So what, you might ask. At the £30,000 pricing point and even at £50,000, the flat fee platforms I have looked at are more expensive, considerably more so at the lower end, than ours which is charged on basis points.

The crossover on where the flat fee chargers become cheaper depends on factors such as the number of wrappers but it could be quite high.

For example, one platform I looked at charges two fees for a fund switch (sell and buy) per fund, whereas we are free.

The myth that flat charging platforms are cheaper is just that – a myth. For the majority of investors they are probably more expensive.

Basis point charging is very common in financial transactions in all sorts of financial institutions, including banking, fund management and a whole host of others.

Why should platforms be any different? Basis points means there is an element of the wealthier paying a bit more but to change to a flat fee structure across the board would make platforms too expensive and inaccessible for many investors.

In addition, wealthier investors do cost a bit more to administer for a number of reasons such as asset complexity. There is also a risk premium to consider, as if things go wrong they are more expensive to put right.

Of course, price is just one factor in choosing a platform; like any other product or service, platforms offer different features, levels of functionality and service quality.

One report recently mentioned several times platforms charging for ‘custody’ but that is really missing the point; platforms offer a whole lot more.

Bill Vasilieff is chief executive of Novia