Selftrade’s new pricing structure went live yesterday, and while it is just the latest of many broker pricing updates over the last few months, it may well be the most significant. While Fidelity, IG, SVS and Alliance Trust have broadly speaking made small changes, whether upwards or downwards, to existing price structures, Selftrade have made a more fundamental, almost philosophical change. By beginning to charge a % fee on the value of funds (unit trusts or OEICs) held, it leaves just 4 operators charging a fixed fee for holding funds. One of those, Alliance Trust, increased its prices just a few weeks ago. It does beg the question of whether a fixed fee model for holding funds is sustainable, at least at a level which people with smaller amounts are willing to pay.

Going to, freshly updated with Selftrade’s new prices, the discrepancy between those operators which charge a fixed fee for holding funds, and those which charge a % fee, is clear. Anyone with £23,000 or more to invest in a funds ISA will see fixed fee operators fill out the top 3 places, assuming 2 fund switches per year and a 10 year investment period. Any fund investors with £60,000 or more to invest sees the fixed fee operators take a clean sweep of the top 6 places (Halifax, iWeb and Bank of Scotland are all part of Lloyd’s Banking Group), and above that level of assets the gap between fixed fee and % fee just gets wider.

With such a discrepancy on price, and incredibly strong brands such as Halifax and Bank of Scotland included, you would imagine that RDR would have led to fixed fee operators acquiring high value customers hand over fist. To some extent, that’s true – Alliance Trust increased its AUA from £4bn at the end of 20121 to £8.5bn at the end of 20152. However, such an increase in assets has not translated in increased profit. In 2015, while AUA increased by 32%, number of accounts increased by 18%, number of trades by 9% and revenue by just 7%. At the same time, annual losses increased by 33%, from £3.9m to £5.2m. It appears that the new customers attracted by Alliance Trust’s fixed fee model are disproportionately wealthy, but also disproportionately unprofitable.

Looking again at the 6 leading operators on for investing £60,000, they have something in common beyond being fixed fee operators – none of them are rated very highly by companies like Boring Money or the Lang Cat for their user experience and customer service. The primary reason given by Alliance Trust for their recent losses is increased investment in technology to improve the product. It is possible that the wealthier customers who have moved to fixed fee providers over the last 3-4 years demand a quality of service that, at the moment, the fixed fee operators are struggling to deliver. If this has provoked Selftrade’s move to a % fee charging structure, there are at least 4 operators that will be watching very closely how they get on.

There is no doubt that, in general, this sees Selftrade moving from an economical provider to a mid-range one. With no charge for holding funds or for purchasing them, Selftrade used to be the number one choice for people holding funds and making additional regular investments. As the screengrab below from the dev site shows, it is now much further down the list


Based on customer investing £50k in funds and £50k in shares for 10 years, held in an ISA, making 2 fund switches and 2 share switches each year and investing £500 per month split between 3 funds.

For any portfolio including funds, Selftrade has gone from being one of the cheapest, if not the cheapest option, to middle of the pack. However, for share-only portfolios, the reduction in trading fee from £12.50 to £11.75 doesn’t make that much difference – Selftrade remains one of the more expensive providers for trading equities. There is a concern therefore, that while Selftrade will undoubtedly make more money in the short-term from its existing customers, having given away a pricing USP its customer acquisition will suffer.

If it is able to continue growing its customer base even with the new pricing structure, there is a strong chance that the remaining fixed fee operators follow suit. If, on the other hand, it suffers a customer exodus as increasingly price-aware customers choose operators who are more cost-effective for their individual needs, brokers will continue to search for new pricing structures which marry value with service



All leave is cancelled for salespeople in the retail finance publishing industry, as brokers, fund managers and wealth managers all ramp up their marketing budgets imploring people to invest in an ISA before the tax year ends on 5th April. Meanwhile marketing directors at the same companies are bemoaning their luck at the high profile crash eroding investors confidence at the most important time of the year.

It’s fair to assume that Warren Buffett would see all of this as madness. The sage of Omaha is eminently quotable, and one of his most famous is ‘Be fearful when others are greedy, and greedy only when others are fearful.’ It’s likely therefore that, were any platform marketeers able to bend his ear, he would suggest they encourage their customers that ISA or no ISA, this is an excellent time to invest.


A more interesting, and certainly more compliant, of his quotes is ‘Do not save what is left after spending, but spend what is left after saving.’ By making the ISA season the focus of their marketing, brokers may be accepting of human nature, but are encouraging their customers to directly contradict Buffett’s advice. Buffett would be more likely to suggest they market a product that many brokers have, but which is rarely used – a regular investing package.

Hargreaves Lansdown has been operating its Regular Savings service for 12 years, and while take-up is increasing only 105,000 (14%) of 727,000 total clients used the service in FY2015.1 Yet the regular savings scheme is better for customers, not just because the fiscal discipline will give them more to save, but because they will tend to get better returns.

There are two reasons for this; money that has been invested for longer has benefitted more from the (generally) rising market over the period and by default you are able to be fearful when others are greedy and greedy when others are fearful. By investing a set amount each time you automatically buy fewer shares when markets are at a peak and more shares when they are in a dip.

Our hope is that April 2016 will not see broker marketing disappearing as it does most years, but a consistent campaign across the year extolling the benefits of regular investing. Unfortunately not all providers offer a regular investing option even though the products that currently exist are not only good for customers, but make very good margin for operators, as the trades can be executed in bulk. More people using a regular investing service will result in more customers with improved savings habits and better returns, and improved margins for brokers – a scenario to impress Warren Buffett himself.

To see how regular investing may impact your trading fees, visit Broker Compare for a market-wide comparison.

For a free consultation on how to successfully implement a regular investing option, please contact us at or on Twitter @BlackSwanBSP

1Hargreaves Lansdown Annual Report 2015