AFH brings forward timeline on scrapping platform fees

Wednesday August 2018

AFH brings forward timeline on scrapping platform fees

For new clients and investment top-ups

National adviser network AFH has brought forward its plan to scrap platform fees, effective from today for new clients and those topping up their investments.

To allow for a comprehensive review of their current portfolios, AFH said other existing clients' platform fees would be removed by 1 November.

Last month, AFH confirmed it would be scrapping platform fees for all of its clients but said this would be effective from the end of the year.

In June, chief executive Alan Hudson told Professional Adviserthe move was "inevitable", saying the only question was as to what timescale over which this would occur.

In this latest update, Hudson said: "Unlike ongoing adviser charges and active fund management, which add direct value to clients, platforms are a dead weight and only subtract from performance."

Platform study

The Financial Conduct Authority's (FCA) recent platform market study interim report, Hudson said, suggested price was not advisers' primary reason advisers for picking a particular platform - it was the service to the adviser.

"That would be fine if the adviser was paying for it, but they aren't," he argued. "If advisers had to pay for platforms, they wouldn't be as expensive as they are now."

On average platforms charge around 30bps a year, Hudson pointed out, which for a client with a £50,000 pension would add up to more than £12,500 over 25 years. This would slash the final pot from almost £175,000 to just more than £160,000 - assuming 5% annual growth.

"It doesn't matter how wealthy you are: would you pay £600 a year on a £200,000 portfolio if you didn't have to?" he continued. 

"Investment returns are predicted to be lower, which means that money could make a significant difference to a client's return/cost ratio.

"And with the FCA's focus on value for money, it's inevitable that adviser charging and particularly ongoing adviser charges will be next on their radar, so increasing adviser charging to include platform fees is not an option." 

He added: "I think between the FCA and their own clients, advisers are soon going to be facing some tough questions."