The Lang Cat principal Mark Polson says the complexity of platform pricing is reaching its “inflection point” and that new platform entrants are set to challenge the traditional basis points charging structure.
Speaking at the Institute of Financial Planning conference in Newport last week, Polson said he failed to understand why typical platform charges were set in basis points according to percentage of assets invested.
He argued while advisers create a financial plan for their share of the client’s returns, platform costs are little more expensive for high net worth clients with negligible additional costs in running £100m in a fund rather than £80m.
Polson said: “I can’t help thinking that when you see all these layers of implicit charges, we have kind of lost it a bit.
“Platform charging must be reaching its inflection point. Existing platforms may not want to change their models but we will see some entrants move their pricing to either a mixture of fixed costs and basis points similar to AJ Bell, or fixed costs like Alliance Trust Savings. There are only a few people doing this kind of pricing right now but I know there is someone else planning to do it in the next little while so expect some moves around that.”
Clearwater Financial Planning managing director Duncan Carter says: “A fixed costs charging model makes sense because the value of funds under management does not make much difference to the cost of running a platform. I agree platforms will start to change, but it is important to remember it is not about cost, but the value a platform delivers.”