The big news this week has been the acquisition of Alliance Trust Savings by Interactive Investor. Adding the £15bn of new assets, this makes Interactive Investor a substantial platform – one of the largest D2C platforms, and with a foothold in the adviser market. Today we look at a few of the ramifications in the adviser and direct to consumer markets.
When it acquired TD Direct Investing in 2016 Interactive Investor became the number two D2C player, and it is consolidating that position with over £8bn of execution-only AUA from ATS. It will still be less than half the size of Hargreaves Lansdown, but almost double the next closest D2C rival, Fidelity Personal Investing.
For all but the smallest investors, its fixed annual fee is cheap compared with all those platforms that charge a percentage of assets held. Platforum consumer research shows that self-directed investors are more price sensitive these days and Interactive Investor sees an opportunity to corner this market.
One factor that is little discussed is the high proportion of Alliance Trust shares held on the ATS platform. Around a third of the trust’s shares are held through the platform. Assuming the vast majority of this is held by non-advised investors, shares in the investment trust equate to around 10% of ATS’ self-directed AUA.
Unique in the adviser market
We’re yet to hear Interactive Investor’s plans for the adviser side of ATS. Running an adviser platform is a different kettle of fish to a direct platform, as ATS is well aware. Client reporting, online tools and investment functionality such as model portfolios and discretionary management are becoming more important as advisers try to make their own processes more efficient. While ATS is popular with some advisers due to its low fees, it tends to score lower in these areas.
The platform is already upgrading to GBST Composer to improve in this regard. We look forward to hearing Interactive Investor’s plans in this department!
ATS is the only platform offering a flat-fee model in the adviser market. However, the last couple of years have seen adviser platforms trim their charges for larger portfolios and several platforms implement fee caps. Other platforms are therefore competitive for large portfolios (particularly for clients using multiple wrappers). Interactive Investor needs to look beyond price if it’s looking to make a play in the adviser market.
Our Adviser Platform Pricing Guide is out next week, in which we compare the merits of different charging models. Contact Jean-Luc de Jonge (email@example.com) for details.