Bestinvest announces new pricing for its Online Investment Service, significantly undercutting key rivals on SIPPs

Bestinvest is pleased to announce that from 1 March 2014 it will implement a new pricing model for its Online Investment Service (OIS). The new fee structure is fully transparent and significantly lowers the cost of investing for the overwhelming majority of clients. It will reward clients for higher levels of investment and for the longer-term nature of Self-Invested Personal Pension plans.

In developing the new pricing structure, Bestinvest has been guided by three cornerstone objectives:

• Reward client loyalty based on the level of investment assets accumulated and in recognition of the greater longer-term commitments made when investing in SIPPs
• Deliver a simple fee structure across all investment types whether funds, investment trusts, ETFs or shares and in doing so remove pricing bias. It also offers more competitive pricing for an investor using their ISA allowance in a mix of funds and shares, avoiding the fixed fees for holding investment trusts, ETFs or shares levied by key competitors
• Offer excellent value for money for a service which helps clients manage their investments with leading investment guidance and portfolio analysis tools, underpinned by rigorous and unbiased research across the whole-market

The new tiered fee structure will be based on assets held (excluding cash balances) and will apply separately to each account held by the client. The tiered rates for account types will be:

The new service fees will be attractive for fund-based Stocks & Shares ISAs and General Investment Accounts for investors at all asset levels compared to Bestinvest’s main competitor and significantly so for investors in SIPPs where the account fee will be 0.30% for investments up to £250,000, reducing to 0.20% for assets between £250,000 up to £1m. No fees will be levied for asset balances in excess of £1m. Bestinvest will pay up to £500 towards the cost of any exit fees for investors seeking to transfer into its award-winning SIPP.

Eliminating bias for different types of investment

A further feature of the new OIS pricing model is that the service fees will be agnostic towards the underlying choice of investment held and will not discriminate between funds, investment trusts, ETFs or shares.

Bestinvest has been strongly supportive of regulatory changes that have removed product bias arising from commission. Unlike major competitor services, Bestinvest applies its research ratings to investment trusts and ETFs alongside funds. Indeed some 37% of the investments rated Bestinvest’s Premier Selection are investment trusts or investment companies. We note that competitors continue to perpetuate differential pricing structures based on the underlying investment-type held rather than the service delivered and their rated-lists of investments appear to remain solely based on open-ended funds^[1].

Bestinvest’s simple, unbiased fee structure means clients can focus on the relative investment merits of each potential holding rather than the implications for their fee structure. By contrast, pricing models of some competitors can trigger additional fixed rate custody charges by a single, small purchase of an ETF or share.

In modelling the impact of the single service fee, we have noted that our average client holds 85% of their investments in funds and 15% in listed securities (investment trusts, ETFs or shares) with low levels of trading activity on the latter. With the single fee, the majority of Bestinvest clients will pay lower fees on their shares, ETFs, investment trusts and funds. For investors in an ISA with both funds and shares, we believe our pricing will also undercut our key rivals (see appendix A].

There will be no initial charges or switching charges on funds and a continued low flat rate dealing fee on shares of £7.50. All other ad hoc fees remain unchanged and no new fee categories are being introduced. There are no fees for reinvesting dividends.

Lower costs achieved for investors without compromising research process – average AMC on Premier Selection funds is 0.66%

The Online Investment Service provides access to a considerable breadth of choice, with over 2,000 funds available as well as investment trusts, ETFs and shares.

We are able to offer competitive pricing on fund products for our clients without compromising our research process or narrowing our list of research rated funds. Annual Management Charges are on average 0.66% for funds in our Premier Selection. In addition we research rate other low cost options including ETFs and investment trusts. No funds have had research ratings added or removed on the basis of charging negotiations.

Peter Hall, Chief Executive of Bestinvest commented:

“Our goal is to offer investors an exceptional value-for-money service that is underpinned by rigorous and unbiased research. We know from our years of experience that saving for retirement is one of the most critical personal finance challenges clients face. For the award-winning Best SIPP we have introduced an even lower service fee to enable clients to get the best possible outcome from their retirement savings.

“The Online Investment Service is much more than a ‘fund-supermarket’, it offers a wide range of investments and market-leading guidance and analysis tools. With banks withdrawing from the advice market, we believe this service is well placed to help bridge the gap for those investors who are prepared to make their own decisions but need a helping hand.”

Note: From 1 March all new fund investments will be made into unbundled ‘clean’ share classes and for existing holdings there will be a full rebate of all commissions to the client. To arrange an interview with Peter Hall please call us on 020 7189 2403 or email roisin.hynes@bestinvest.co.uk

[1] Hargreaves Lansdown’s Wealth 150 currently constitutes 94 funds, no investment trusts and no ETFs. The Fidelity Select List currently includes 140 funds, no investment trusts and no ETFs. In contrast the Bestinvest Premier Selection includes 133 funds, 80 investments trust and 6 ETFs. Source: company website.