Transact cuts annual and switch charges

Transact has cut its annual and switch charges and applied a new single rate for users.

The changes, part of its client profit share policy, are effective from today (March 1), and Transact says the cuts have come about after a successful financial year. The wrap made £14m in profits last year.

In terms of transaction commissions, the charge when cash is first used to buy an asset has been reduced from 0.5% to 0.2%. Because the new rate is equal to its switch commission, the distinction between the two has been removed.

The new single rate, Transact Buy Commission, applies to all purchase transactions. This rate is reduced by way of rebate to 0.1% for portfolios whose average value over the prior three months exceeded £1m.

Transact Buy Commission is zero for portfolios whose average value over the prior three months was more than £2m.

Annual commission has also been reduced from 0.6% per annum on holdings of cash that have already been subject to initial commission to 0.45%.

The changes have no impact on adviser payment rates.

"Most platforms are operating at a loss, even after having achieved quite substantial
Scale," says managing director Ian Taylor. "Clearly, in the long term, that is not sustainable. We believe the platform market is in a perilous position unless it does something to correct this suicidal pricing.

"However, there is a difference between profitable and sustainable and plain greedy.
So we have always tried to adapt the mix of charges and discounts to maintain a
balance between the needs of all our stakeholders - our customers, our shareholders
and our employees.

Transact's cut in charges comes after Nucleus chief David Ferguson highlighted the fact some smaller platforms are offering cut-throat deals and undercutting their published charges in order to secure IFA relationships.

Skandia recently drew up a 50 basis point business plan on the premise costs will be contained and profits made within 50bps of funds under management.