James Hay‘s pricing structure overhaul has caused a stir among advisers who argue the platform has “gone too far” and risks losing business going forward.
James Hay overhauled the way it charges last week. While the changes favour larger investors, some clients will see price increases.
The firm has amended its tiered structure with platform charges starting at 0.25 per cent on the first £300,000 investment, which includes cash accounts, compared with 0.18 per cent on the first £500,000 currently.
Charges then reduce in stages to 0.01 per cent on investments over £1.5m, reduced from 0.5 per cent.
Additional charges will be applied for Sipps in drawdown and will only apply to customers using capped drawdown. These will increase from £100 to £150. A drawdown closure charge has also been added at £100.
For the firm’s average Modular iPlan portfolio size the change will result in an average annual increase of around 0.036 per cent.
Thameside Financial Planning director Tom Kean says James Hay’s move is changing “the rules of engagement” and the firm risks losing clients as a Sipp provider.
He says: “We’ve had a long and unhappy experience of James Hay, and most other people I talk to say the same thing. All of this is a little academic given their administration issues over the years.
“But taking the next step and charging for cash is a psychological step too far in my view. This completely changes the rules of engagement, so I can imagine lots of business walking now.”
James Hay ranks eighth among the largest UK platforms by assets at £22.11bn as of the end of 2016, according to Platforum. It has 5.2 per cent of market share.
Plan Money director Peter Chadborn says it is “disappointing” that platforms continue to charge on a percentage and tiered basis as this might continue to put off many advisers.
“James Hay are clearly targeting larger case sizes, perhaps making the assumption that they cannot compete at the lower end due to the increased prevalence of direct to consumer and ‘robo’ propositions.
“I expect to see platforms continue to tweak their charging structures in order to target certain case sizes, but it’s disappointing that there are not more fixed fee charging structures, such as Alliance Trust Savings. The more variables within a platform’s changing structure the less likely I am to use it; clients understand and appreciate simplicity and transparency.”
Equilibrium partner and investment manager Mike Deverell says the multi-leveled structure is not easy to compare with the rest of the market for advisers.
He says: “Looking at the charging structure it does seem incredibly complicated. Frankly they don’t make it easy to do a comparison and whether clients are better or worse off will depend on their own circunstances. I have no issue with them charging for cash as they still have to administer the platform.”
James Hay chief executive Alastair Conway says even after the changes, the firm is still five basis points below the market average.
Conway says: “It’s our belief that cash accounts should not be used for medium-long term investment purposes, especially in the current low interest rate environment. Our feedback suggests the advice community, on the whole, accepts that cash accounts are there for one reason only and that is to hold cash for transaction charges and fees.
“Very few platforms are currently paying interest net of charges on cash accounts so we’re not out of line here with others.
“At James Hay we do not insist our clients hold cash on a permanent basis and allow advisers to set alerts for low cash balances but also allow them to set high balance alerts too. This approach helps advisers identify which of their clients have cash and who might be better served moving to a fixed term deposit, for example.”