Many execution-only fund supermarkets and investment platforms rely on fund rebates for revenue. With the FSA proposing to ban these rebates from January 2014, such firms - already squeezed by falling dealing volumes - could suddenly find themselves under pressure to introduce new ways of generating revenue.
Business models are already changing, with a definite trend for increasing direct charges to customers. Some emerging strategies include:
Billy Mackay, Marketing Director at AJ Bell, commented: “By issuing a Price Pledge, we’re giving our existing and potential customers confidence that we have no plans to increase our charges. We recognise that there is regulatory change coming that will impact the way in which investment platforms get paid by the fund groups, but we see this as an opportunity to improve the deal for our customers, rather than to increase our charges. We’re committed to maintaining our position as one of the best value SIPP, ISA and Dealing Account platforms.”
Mackay continued: “We are aware that a number of firms have recently increased their charges, and we’re frequently asked whether we intend to follow suit. We launched Sippdeal in October 2000 as the UK’s first online SIPP, and took the ground-breaking decision to put low dealing costs and zero account or inactivity charges at the heart of our pricing policy. Since launch we have reduced our charges on a number of occasions, and further reductions are not entirely out of the question.”
AJ Bell is one of the UK’s largest and most profitable investment platforms, with assets under administration of £16 billion. Full details of the Sippdeal Price Pledge can be found here.