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Platforms clash on unbundling costs

Skandia has warned that the unbundling of platform charges can result in higher costs for the investor but rivals say transparent charging is paramount.

Head of proposition marketing Peter Jordan says there is a direct correlation between the level of unbundling and the cost to the consumer.

Research using Skandia’s Platformwatch tool shows that a client investing £157,200 across a range of wrappers and switching 20 per cent of the portfolio annually would incur a charge of between 1.79 per cent and 2.25 per cent, depending on the platform used.

One platform which unbundles nine separate charges would cost 2.25 per cent, compared with 1.99 per cent for a platform that unbundles six. Skandia Investment Solutions, which sets out four charges, says it would cost 1.79 per cent.

Jordan says: “It is debatable whether unbundling makes things easier to understand but if that is the direction that the RDR takes us in, it is important that it does not result in higher costs for investors.

“The use of multiple charges paves the way to portray a proposition as whiter than white due to the level of unbundling but this may not be the real reason for this complexity. Platforms must not be allowed to use complex charging structures to obscure the true cost of their service.”

But Nucleus chief executive David Ferguson says: “The market needs to unbundle in order for informed decisions to be made. We do not currently know how much is being retained by fund supermarkets in dirty margins, such as derisory interest rates on cash and kickbacks from fund managers.”

Novia chief executive Bill Vasilieff says: “Our charges are tiered and you will find at certain levels our charges are significantly less than Skandia’s. In addition, you cannot compare a simple supermarket, such as theirs, with full wealth manager platform like ours.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Unbundle platform charges
    Selestia say they dont charge for switches, but this is just an equivocation, if fees are bundled in with other things.
    As advisers we compare products and providers and look closely at fees, especially products that claim to be cheap.
    We use a dealing platform (Moventum) that details every fee, this is better for us and our clients as they know exactly what costs they incur, where and why.
    I agree with Nucleus that there are investment platforms and there are supermarkets, Selestia is a supermarket. Transparancy is key.

  2. Unbundled Platform Charges
    Why does Mr Jordan continue to compare what his company do with Wrap platforms? Apart from the normal range of OEIC’s and Unit Trusts Wrap platforms trade in instruments such as ETF’s, Structured Products, Hedge Funds, Gilts, Equities not to mention a range of Cash Deposits. Very simply, these instruments are more costly to deal with than run-of-the-mill retail OEIC’s and Unit Trusts which trade once a day all at the same time!!! On top of that none of the instruments I mentioned give ‘back handers’ to the providers either. Shouldn’t he just stick to the point that if an IFA only wishes to deal in retail OEIC’s and Unit trusts then his company receive a bigger rebate than others and stop trying to compare a fund supermarket to a wealth management platform. He’s so predictable it’s becoming boring.

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