Skandia scraps front end margin on platform

Skandia is to remove the entire front end margin it receives via the Selestia Investment Solutions platform from 15 September.

The only initial charge Skandia will levy is whatever commission the investor agrees with their adviser, so if an adviser reduces commission to zero then there is no initial charge. It will continue to charge an annual platform fee of £50 per client.

The new charging structure will apply to new business, top ups and regular investments made by both existing and new investors. The charging structure for Skandia Life and Skandia MultiFunds business will remain the same.

Currently the initial charge and maximum commission level vary by product wrapper. However, following the pricing change, Skandia will take no initial margin on and the maximum commission available to advisers will be 4.5%, regardless of product wrapper.

This means advisers will be able to take more commission on ISA, onshore bonds or unwrapped funds (up from an average maximum commission of 4.2% from a 5% initial charge) and pensions (up from an average max commission rate of 4.2% from 5.2% initial charge). However, the average max commission rate of 5.2% on offshore bonds (from an initial charge of 6%) will be cut to 4.5%.

The average initial margins Skandia was taking on these products were:

• ISA, onshore bonds or unwrapped funds: 0.8%
• Pension: 1.0%
• Offshore bond: 0.8%

The new charging structure reflects many aspects of Customer Agreed Remuneration (CAR), the group says. It will be backed up by further changes during 2009 which will un-bundle commission payments and aim at a completely transparent structure for managing fund rebate payments.

Nick Poyntz-Wright, chief executive of Skandia UK, comments: “It is clear the FSA will use the RDR to drive the market to achieve greater clarity, simplicity and reduce costs and ultimately improve outcomes for consumers. After a period of increasing complexity and expense it is clear that the UK platform market needs to move on and deliver better value propositions which are simple and clear.

"There is an obligation on the market leaders to make rapid progress in this direction and Skandia is the first to take a significant step towards meeting this challenge. "

The enhancements are part of a wide programme of developments to the platform planned by Skandia which are expected to include:

• Widening the investment range to embrace equities, exchange traded funds and gilts
• White labelling to enable adviser branding of the platform adding a SIPP to the platform
• Enhanced links to / from advisers’ back office systems.

Have Your Say

What is your view on Skandia's new charging structure for Selestia Investment Solutions? Will it benefit you and your clients?

"This is fantastic news and a stance which the industry has long needed to take. I am sure that advisory firms will welcome it with open arms, and surely questions will be asked of anyone using alternative but less transparently charged contracts. It will be interesting to see if any of the others dare follow!"

Michael Inkley is director at Sanderson Law Pensions Management

Contact:

Katrina Baugh

Editor, IFAonline.co.uk

0207 4849783

katrina.baugh@incisivemedia.com