Fairbairn cuts QROPS costs, yet questions quality at 'cheapest' end of the market
Fairbairn Trust has launched what it describes as a “simple, low-cost QROPS” designed specifically for offshore bond business.
The new product has been launched as some providers - Fairbairn among them - have questioned the merits of taking charges too low, amid claims service and quality will suffer. It has been further suggested that apparent zero-cost QROPS may have hidden charges about which investors may not be aware.
The charges on Fairbairn’s new QROPS One are £975 each for the initial fee and annual fee. However, in order to qualify for these levels, the entire QROPS fund must be invested in a single offshore bond wrapper - though fees have also been reduced on its existing, open architecture QROPS.
The Guernsey-based company – whose QROPS product range is sold as The Overseas Pension – is the latest firm to offer a cut-price QROPS.
In March, Close and Concept, the latter both for its in-house product and on that available in a joint venture with Skandia, slashed their fees to some of the lowest in the market in a bid to gain greater market share. And only yesterday Gibraltar-based STM Fidecs unveiled a tie-up with Prudential, through which a zero fee option QROPS has been created.
Nathan Lihou, Fairbairn Trust managing director, said IFAs should be wary of declining standards if providers go a long way down the fee-cutting route: “There comes a point where a provider cuts costs to attract business, but ultimately service standards suffer.
“The client may have a slightly lower charge, but costs to the adviser escalate as they are left chasing the case and waiting to be paid.
He added: “When selecting a QROPS - or any other financial services product - firms that are cheapest are rarely the best.”
Fairbarn’s new charges – while now more competitive – remain slightly higher than those of Close and Concept. Other providers, such as STM and Mac Financial in the Isle of Man, provide the QROPS structure ostensibly without any charges.
However, there has been criticism – by rival providers – of such low or no-cost set-ups, in which just one provider’s funds are available. Some suggest the zero-cost aspect fools investors, who will in fact be effectively charged through lower investment allocations being made or so-called ‘retrocession’ arrangements.
Lihou added: “A number of providers have a low cost QROPS that only allows investment into a small range of their own or external funds.
“We looked at this model as a possible business development but felt that we wished to maintain our total independence and not compromise our "open architecture" status.
“We assume the funds will be paying "kick backs" to the providers. We felt that in a world that is starting to embrace RDR this was a step backwards into the old offshore commission practices and thus we did not want to be associated with such a product.”