Platforum: ATS flat-fee models drives impressive assets growth

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Alliance Trust Savings offers both a direct and adviser proposition. The bulk of the assets (80 per cent) sit in the D2C part of the business, with the remaining 20 per cent on the adviser side.

This ratio has shifted from a roughly 90/10 per cent split as a result of a stronger focus on the adviser market. Indeed, the platform currently has 2,000 adviser users, up from 700 a year ago.

Adviser assets on the platform remain small at £1.69bn of the overall £7.21bn. However, with nearly 10 per cent growth in assets under administration in the second quarter of this year, and 72 per cent growth in the 12 months to 30 June, the platform is growing faster than its competitors.

Alliance Trust Savings is unique in that it offers a flat-fee model; an approach gaining traction with a growing number of advisers. In our latest quarterly survey it achieved the highest score for ‘value for fees charged’ with 4.71 out of a total possible 5 points. All the positive comments left by advisers related to the flat-fee structure.

Indeed, this structure makes a massive difference for larger accounts. While Alliance Trust Savings is among the most expensive platforms for portfolios of £50,000 and £100,000, our analysis puts it as the lowest cost option for portfolios over £500,000.

For example, a buy-and-hold investor placing eight trades a year with a portfolio valued at £50,000 will pay £250 a year compared with £125 with Aviva. However, an investor with a portfolio of £500,000 with 14 trades per year will pay £511 a year compared to £1,432 with Aviva or £2,250 with Novia.

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Meanwhile, a customer with £50,000 invested in models (assuming 100 trades per year) will incur charges of £300 a year compared with £125 on Aviva, while, at £500,000 (assuming 250 trades per year), the investor would pay £575 compared with Novia at £2,250. This is based on pricing coming into effect in Q4.

However, fees are only one aspect affecting platform selection, with advisers telling us they want to pay a fair price for what is offered rather than the lowest charges possible.

Indeed, many find investment choice and service more important, and while Alliance Trust Savings’ reviews are improving, the platform is criticised for not offering comprehensive coverage of funds as well as for a lack of tools.

It will be upgrading to GBST Composer to address criticisms its technology is out of date, which will also improve functionality.

Managing director Patrick Mill has said the platform will be profitable in 2016 because of the scale delivered by Stocktrade, which was acquired in May, while Katherine Garrett-Cox,
chief executive of the fund management arm, has said Alliance Trust Savings will grow more through further acquisitions.

Garrett-Cox stepped down from the board last week, however, so whether that prediction is still
on the cards is unknown.

There are rumours the platform will be sold or spun off but others insist Alliance Trust is firmly committed to it. With the parent company appointing a new independent board we will be watching closely for any signs it is either “polishing its apple” before a sale or looking for further acquisitions.

Heather Hopkins is research director at Platforum

To complete Platforum’s survey on investment platforms (and receive a free summary of research findings) visit http://platforum.co.uk/Blog/J/Rate-your-platform 

Adviser view: Peter Chadborn, director and adviser, Plan Money

A platform is primarily an administrator that needs to serve a number of functions efficiently and at a low, transparent cost. A fixed fee platform fulfils that requirement. We would rather use a low cost platform with relatively simple functionality in conjunction with a subscription to high-quality third party analytical software. As such, we use Alliance Trust Savings in addition to FE Analytics. Other players may have better software but there is a danger of becoming too reliant on the platform due to a dependency on their reporting tools at the client’s unnecessary expense.