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Skandia unbundled reaction: Success depends on rebate deals

The success of Skandia’s unbundled charging structure will depend on the size of rebates it is able to negotiate from fund managers, say industry commentators.

Skandia this morning revealed its unbundled proposition would have a tiered structure ranging from a charge of 0.5 per cent to 0.15 per cent with no annual fee and no wrapper fee.

Assets worth up to £25,000 will be charged 0.5 per cent, between £25,001 and £100,000 0.35 per cent, between £100,001 and £500,000 0.3 per cent, between £500,001 and £1m 0.25 per cent and over £1m 0.15 per cent.

Investors will receive unit rebates through the structure. Skandia says discussions with fund managers are ongoing.

The Lang Cat principal Mark Polson says: “Skandia is going to be using all of its power to try and get the best rebates around. I think the difference between the Skandia pricing and the rest of the market will come down to the rebates it can get from fund managers.”

Polson adds the fact Skandia does not have a wrapper charge puts it in a good position against some competitors which at first glance may seem better value (see tables below).

Mark Polson AMC
Platform charges for Isa/investment business

Mark Polson AMC/wrapper table
Platform charges including pension wrapper charge

Polson says: “Skandia has been the only one of the big three to offer a proper multi-wrapper proposition. Skandia Investment Solutions has integrated wrappers, making it the most wrap-like of the big guys. This gives it an advantage over Fidelity and Cofunds.”

The Platforum managing director Holly Mackay says: “For me, the elephant in the room here is the fund manager element of the story. If Skandia can flex its enormous muscle and negotiate additional rebates from fund managers it will pass these back in unit form to the end client and not retain these as additional revenue.

“I think the Skandia pricing is relatively safe in terms of how much, I think it is good that it is quite a simple structure and I think it is impossible to fully assess the net impact to the consumer without the fund manager piece.”

Forty Two Wealth management partner Alan Dick says Skandia may struggle to convince fund managers to give it the rebates it wants.

He says: “I do not really understand how Skandia will be able to achieve this. Why would you want to run a rebate model when there is going to be a full range of clean share classes available.

“I am not convinced that fund managers will make an exception for Skandia when neither Fidelity or Cofunds will be negotiating rebates.”

Murphy Financial associate partner Adrian Murphy says although the Skandia charging model is similar to most of the market in terms of its structure, a flat fee would be fairer to clients than percentages.

He says : “I think the Skandia charges seem fine on the face of it but I would like to see a change to the way most platforms charge.

“I do not think it is fair to customers that they have to pay a percentage of their investment even though the service is the same regardless of how much you invest.”

Thomas and Thomas Financial Services managing director Darren Lloyd Thomas says the proposition will be attractive to advisers and the pricing will come down further over the next 12 months.

“I think Skandia has set a price that is profitable for it at the moment but you will definitely see that price come down further. I do worry about advisers looking for the cheapest option in the market though, rather than the most appropriate for their client.”

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Seems OK to me. Not dynamic, just OK. Skanida will only maintain their status as one of the top 3 by extending their fund range, which i understand is on the way, offer family discounts (again, coming in phase 2) don’t appear to be more expensive that CoF / FNW, and maintain their margin btwn themselves and the Wraps like Aviva, Nucleus, Elevate.

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