By ROBIN POWELL
Be in no doubt, the UK investing is changing, and the new-look industry taking shape is far more efficient and far more focused on improving consumer outcomes than the one it’s replacing.
For years, progress seemed to be painfully slow. But, just of late, the pace of change has been very fast. Now, in the space of 24 hours we’ve seen the launch of two new services which set the standard for others to aim at.
Yesterday, Vanguard launched the Vanguard Personal Pension, a Self-Invested Personal Pension, or SIPP, designed to make saving for retirement simpler and less expensive. The SIPP, which is open initially to “accumulation” stage investors, is the cheapest on the market for the average British pension holder.
There will be an account fee of 0.15%, capped at £375 across all accounts in an investors’ name on the Vanguard Personal Investor platform. You can invest from just £100 a month or with an initial lump sum of £500. Customers will have access to 77 low-cost, broadly diversified funds ETFs, including Vanguard’s Target Retirement Fund and LifeStrategy ranges.
This is a hugely exciting development which will make saving for retirement far cheaper and simpler than it historically has been.
Today, another new service was launched. It’s on a much smaller scale, and it hasn’t received anything like the same amount of publicity. But, for me, the announcement by Sparrows Capital that it’s offering financial advisers a platform-based model portfolio service for just ten basis points a year, or £20 a month, is just as significant.
That fee covers everything — portfolio construction, index selection, index fund screening, portfolio monitoring, risk management and rebalancing — and it’s a tiny fraction of what most advisers currently pay for discretionary fund management.
Announcing the details of its SCore MPS range, Sparrows Capital chief executive Yariv Haim said this:
“Charging asset-based fees for model portfolios is not only outdated, it is unfair on clients and unjustifiable. The launch of this price disruptive product addresses regulatory concerns over the provision of value to end investors, while responding to issues of accessibility, transparency and cost identified by the introduction of MiFID II. Clear and predictable pricing will enable IFAs to deliver better outcomes to their clients.”
Of course, there are many people, particularly younger investors, who will feel they can manage without a financial adviser, at least for now. For them, the Vanguard SIPP is an ideal solution. Let’s hope as well that other providers are spurred into offering similarly straightforward, low-cost pensions of their own.
But everybody can benefit from good financial advice, and particularly from holistic financial planning. The Sparrows Capital offering is perfect for advisers and planners who want a low-cost, evidence-based investment solution that allows them to focus on areas where they really can add value.
I have to express an interest here. Sparrows Capital is one of TEBI’s strategic partners. Without the financial support that Sparrows gives us we couldn’t produce either the volume or the quality of the content we do. So yes, I’m not a totally impartial observer.
But, like Vanguard, our friends at Sparrows have thrown down the gauntlet. Let’s see how their far more expensive rivals respond.
Picture: Vincenzo Landino via Unsplash