In the back
[ PLATFORMS & PENSIONS ]
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It takes a while for a new type of investment platform
to find traction, but there’s only so long a company can
keep spending more money than it is making
Savings and The Share Centre.
Will consolidation of the UK’s
investment platforms stop here?
Probably not and I can see mounting
pressure on the larger players to start
sweeping up their smaller rivals to
form four or five super platforms.
One of these is likely to be Vanguard,
the giant US fund manager which has
taken its home market by storm and is
likely to repeat the feat here.
Keeping it simple
Although it only sells its own funds
– predominantly ETFs – it has highly
regarded fund portfolios, such as the
LifeStrategy range, which are cheap
and easy to understand.
If Vanguard owns this part of the
market, how will the other main
players adapt their strategies to serve
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the remaining investors seeking more
choice, tools, content, analysis and
customer service?
The segment where costs are
relatively high and service offering
is low is likely to be unpopular with
customers and no platform would like
to be seen there.
Vanguard is likely to occupy the
low-cost no-frills part of the diagram
on the previous page and it is hard to
imagine other players beating it at this
strategy. Its proposition is also likely
to limit the growth of robo-advisers
such as Nutmeg and has the potential
to decimate that sector completely
now it has a pension vehicle on top of
its ISA and general account.
Fidelity, another company with US
roots, has again seen success in its
home market but has struggled
to go toe-to-toe with the
larger platforms in the UK. I
suspect there is still a level
of confusion about whether
Fidelity is a fund manager
or a platform and whether
this biases its offering towards
its own fund products.
The three strongest platforms
with UK roots are Hargreaves,
interactive investor and AJ Bell,
purely because of their focus. They
are pure-bred investment platforms,
not some division of a financial
conglomerate and, as such, are
commercially driven to deliver the best
possible experience to UK investors at
a price they are happy with.
Starting point
All three are aimed more at the
experienced hobbyist investor, but
they are innovative, with a range of
ready-made investments suitable for
novices.
Their pricing models are all
different: Hargreaves has a formidable
headline platform fee of 0.45 per cent
per annum, but this is helpful for new
investors getting started as opposed to
a fixed-fee model such as interactive
investor’s. The latter’s model is
extremely popular with larger
portfolios as it costs proportionately
less as your pot grows. AJ Bell has
something inbetween – a platform
fee of 0.25 per cent which is good for
smaller accounts and pensions, as
there is no SIPP administration fee.
In terms of investor support,
information and analysis offered by
the three behemoths, they are all
broadly excellent.
Both interactive investor
and AJ Bell bought and
developed financial
publishing divisions
to help investors
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