AFH chief executive Alan Hudson said: “Unlike ongoing adviser charges and active fund management, which add direct value to clients, platforms are a dead weight and only subtract from performance.”
There will be no increase in adviser charges to clients, no cut to adviser remuneration and no change to the firm’s investment proposition or portfolio construction, he said.
To allow for a comprehensive review of their current portfolios, existing AFH clients’ platform fees will be removed by 1 November.
International Adviser sought additional information about the potential cost implications for AFH Group, but the firm declined to comment.
Expensive platforms
Hudson said: “The FCA’s recent report on the platform market study suggests price isn’t the primary reason advisers pick a particular platform; the service to the adviser is. That would be fine if the adviser was paying for it, but they aren’t.
“If advisers had to pay for platforms, they wouldn’t be as expensive as they are now.”
He said, on average, platforms charge around 30bps per year, which would add up to more than £12,500 over 25 years for a client with a £50,000 ($65,664, €56,081) pension.
Assuming 5% annual growth, this would slash the final pot from almost £175,000 to just over £160,000.
“It doesn’t matter how wealthy you are, would you pay £600 a year on a £200,000 portfolio if you didn’t have to?” Hudson asked.
“Investment returns are predicted to be lower, which means that money could make a significant difference to a client’s return/cost ratio.”
Regulatory scrutiny
Hudson continued: “And with the FCA’s focus on value for money, it’s inevitable that adviser charging, and particularly ongoing adviser charges will be next on their radar, so increasing adviser charging to include platform fees is not an option.
“I think, between the FCA and their own clients, advisers are soon going to be facing some tough questions. AFH’s removal of platform fees, combined with our institutionally-priced segmented mandates, makes for a compelling answer to those questions.”
Worcestershire-based AFH Group reported turnover in the six months to 30 March 2018 of £22.7m, an increase of more than 60% on the same period the previous year. It currently has £3.2bn funds under management.
