Followers of the tweeting between Southampton and Edinburgh know it is a lot more fun than EastEnders. The minor increase in traffic in recent days indicates Skandia’s unbundled proposition is not weak, as it would have been taken apart by the boys up North, nor a market-leading game-changer, as Southampton correspondents have been calmly confident.
During the past couple of years, price has been the big platform issue, especially in the minds of the regulators. Ironically, advisers have been relatively disinterested. They say that unless your choice of platform is out of kilter with your customer segment, they are all within a couple of basis points of 35 and no one crosses the road for a couple of BPS. It would be nuts if Skandia chose to engage in a price war.
It has not. Indeed, it has decided not to change the game radically.
At the start of the year, we wondered if the big fund platforms would target the wraps with their unbundled offerings. Thirty per cent of wrap users told us they would consider supporting them. However, FundsNetwork and Cofunds have chosen to compete in the same big boys’ league and Skandia has followed. That said, they will compete at the margins as aggressively as ever with the wraps.
There are a couple of areas where competition could be cut throat. Much has been made in the press in the past few days about rebate competition. It may be less than is assumed because the big three have similar clout, but there is a second reason. Rebate rivalry will be moderated because of the different fund choices of different platform users. Many wrap users favour passives, while major networks, big users of the fund supermarkets, often favour supposedly low-risk multi-manager funds. As a result, we see more competition between Skandia and FundsNetwork than between Cofunds and Ascentric.
It is likely the real competition will be among the big distributors on their restricted offerings. Again, these will likely be dictated by what investment proposition will attract the right advisers. If you are looking for new world financial planners to sell your proposition, multi-manager may not be the answer.
Wrappers will be key. A few years back, FundsNetwork and Cofunds extended their wrapper ranges by forming strategic alliances with Standard Life and L&G, respectively, in order to compete with the new kids in town, the wrap platforms. That strategy looks a little tired today. The wraps offer cheap, skinny wrappers, multiple-choice product wrappers or both. Skandia has made an aggressive play with a Sipp with no wrapper charge and great scope and functionality. This should be a winner.
Our own research indicates advisers are making choices for their post-RDR propositions based on how platforms support their investment proposition as opposed to price, scope or financial strength. These are just hygiene factors. We also know that more than 50 per cent of advisers would prefer to use a single platform as far as is possible. If a high proportion will require a Sipp wrapper, the Skandia proposition is highly competitive. For those firms that major on funds and Isas for clients with smaller portfolios, Skandia will emphasise service and technical support with continuing development of their planning tools at the fore.
As a final point, it is clear Skandia is aware many of the bigger adviser firms will major on restricted propositions. It is apparent that it has all the toys and will feature well in the beauty parades for these deals.
Let the battle commence.
Clive Waller is managing director of CWC Research