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Nationwide launches regular premium investment advice service

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Nationwide is now able to offer customers the option to make regular premium investments on an adviser charging basis after delays introducing its RDR-ready service. 

The building society operates a single-tied investment advice service through Legal & General. Until now, Nationwide has been unable to accept regular premium business and branch advisers could only advise on lump sum investments.

The regular premium option only relates to investment business. Nationwide, alongside other building societies that partner with L&G, have not been able to offer pensions to its customers on an adviser charging basis as the L&G (UTM) Stakeholder Pension Plan was not able to facilitate adviser charging.

In December Nationwide said it had suspended pension sales until an alternative product which facilitates adviser charging is put in place.

Nationwide charges 3 per cent for initial advice and 0.5 per cent for ongoing advice. For regular premium business, customers will be charged 3 per cent of monthly premiums over 48 months. The minimum monthly payment is £20 a month.

Customers also pay a platform charge starting at 0.65 per cent for assets up to £11,000, dropping to 0.29 per cent for investments between £11,000 and £20,000, and 0.24 per cent on investments over £20,000.

Money Marketing first revealed what the banks were charging for advice in January.

Nationwide head of protection and investments Rob Angus says: “We want to build strong relationships with our customers and help them achieve their long-term goals, offering them easily accessible advice and a choice of options to suit their needs.

“While other high street providers are moving away from mass market advice or setting high minimum amounts before they start offering advice, Nationwide is committed to helping customers who want to broaden their options.”

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. 3% + 1 for an ISA?

    A little toppish no?

  2. Alistair Paterson 11th June 2013 at 12:43 pm

    If I were earning £28.80 (before tax and costs and overheads) from a £20 per month regular savings plan for performing a proper fact find, assessing and prioritising objectives, assessing risk tolerance and risk capacity, performing proper research, preparing a written report and recommendations, making all proper initial disclosures, setting up Client Agreements and Service & Engagement Agreements, preparing and processing applications, receiving and checking and forwarding plan documents and then properly recording all of this in my firms new business records, I would be bust in weeks. Nationwide are more than welcome to help themselves to as much of this kind of business as they wish. I do wonder how they will manage it without cross subsidiising these smaller clients from their larger cliient’s income, as this cannot possibly be profitable.

  3. Be interesting to see how long it is before they either stop or up the charge. This is an unsustainable charging structure losses will mount up and up

  4. Lets face it how many advisers perform a proper fact find, assess and prioritize objectives, assess risk tolerance and risk capacity, perform proper research, prepare a written report and recommendation, make all proper initial disclosures, set up Client Agreements and Service & Engagement Agreements, prepare and process applications, receive, check and forward plan documents and then properly recording all of this in new business records…..not many

  5. We should be commending Nationwide for considering the needs of the ‘have nots’ as well as the ‘haves’, providing this proposition encompasses regular premium investment business and not just pensions.

    The danger is that if this only relates to pensions then auto enrolment is likely put an end to this fairly swiftly. You cannot encourage someone to invest and miss out on an employers pension contribution.

    The long term benefit is that clients who save regularly and build up capital are the IFA markets’ clients of the future, so its important for someone to grow them !

  6. Anonymous.@ 1.51pm

    At our company all advisers carry out those proceedures.

    I would assume most independent firms do. Hence the reason why so many enquiries are turned away – this work cannot be performed for £28.80 as Alistair correctly stated.

  7. For lump sums 3% +.5% fee. No change from commission then, just another name for the same.
    I don’t know how reg savings advice can be profitable on this basis without a cross subsidy.

  8. Soren Lorenson 11th June 2013 at 2:35 pm

    Assuming that a Nationwide advisers annual target is in the region of £100K, he will only need to do 3472 of these cases to hit target. That is a mere 13 a day.

    Somehow I doubt this will work.

  9. Ian, you are quite right, we IFA’s do the job correctly and put our names to our comments.
    Anon 1.51, have you not done the work in the correct manner ? No wonder you will not tell us your name. You are a disgrace.

  10. @ Alistair Paterson – I also understood that under RDR cross subsidising small clients with larger ones on this type of business model would be questioned by the FCA? It will be interesting to see how they explain loss leaders like this! I also agree that AE, for smaller firms, in coming years will see this business largely dry up.So a lot of expense in systems and products for little real long term reward and added expense of the platform for small contributions?Now you know why L&G slashed their IFA distribution business to the bare bones!

  11. Assuming that a Nationwide advisers annual target is in the region of £100K, he will only need to do 3472 of these cases to hit target. That is a mere 13 a day.

    Somehow I doubt this will work.

    ——————————————————————–

    You had better hit 13 a day or you will be on a Performance Improvement Plan!!

  12. Anonymous (Obviously) 11th June 2013 at 6:34 pm

    Rest assured that Nationwide no longer have Targets (lol). Adviser are now expected to complete 5 fact finds and 3 presentation meetings each week. If they can’t/won’t then they will be actively encouraged through a performance management process that Nationwide is not the place for them. As far as Pensions go Nationwide only ever offered a Stakeholder with a choice of 3 funds, poor, very poor & shockingly poor and most advisers with any self-respect/integrity would have made potential clients aware of this, so that they chose not to accept pension advice from Nationwide. As far as investment advice goes, advisers ascertain ATR through a risk questionnaire and their system (Intelligent Office) produces a Model Portfolio. Advisers are actively discouraged from altering this portfolio in any way. I feel confident when I say that any Adviser at Nationwide conducting meetings which resulted in £20 per month regular savings plans would have a very short career indeed. Trust me when I say I know all of this to be true!

  13. PB110

    I can’t believe some people still believe that the FCA has said that there can be no cross-subsidy post RDR. They are quite happy for whatever charging structure you wish providing the client is clear about the costs and formally agrees to them.

  14. Becoming a headcase IFA 12th June 2013 at 8:42 am

    I have to agree with all those that disparaged anonymous vile comments about the lack of care that”proper’ IFAs take. This person is either not an IFA or a very bad one.

    I also agree that the Nationwide mopdel appears completely unsustainable, without cross subsidy, but me understanding is that cross subsidey is not a complete ‘no-no’ as PB110 says. Can anybody add anything to clarify?

  15. Great post. I just located your blog and wished to let you know that I have certainly loved reading your blogs. At any rate I’m going to be subscribing to your feed and I really hope you are writing again soon.

  • This seems to have ignited some passions! Was I wrong in my assessment of the Nationwide charges being excessive?

  • Sam De Zoysa @ 8:57am

    They are % based so it depends. The more a client is willing to save the more likely the costs will look excessive. Hopefully the clients with enough to save to make the costs excessive also have enough sense to seek independent advice.

    Example
    £1,000 per month @ 3% for 48 months is £1,440 for advice.

    Let the markets be the judge i say.

  • Cross-subsidy can happen in two ways. One is allowed, one isn’t.

    In general you can charge any one client what you like and that can amount to a loss leader. You can even provide advice on a pro bono basis. Just because some clients are charged more than others, no problem.

    However, investment advice must only be paid for by adviser charging. So, for example, you cannot use commissions earned from one set of transactions with the client, for example, on life cover and mortgages, to offset fees charged for investment advice for the same client. Any whiff of this type of cross-subsidy will fall foul of the rules (COBS 6.1A4R to be precise).

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