costs down again

Walter Mason          photo: doubleyou_em

Walter Mason                                                                                                               photo: doubleyou_em

Transact price reduction

More good news on costs for future perfect investors.  Transact have announced another price reduction, in two phases.

From 1st March 2014 for clients with portfolios:

  • Under £1m:   Transact’s initial charge will halve from 0.2% to 0.1%
  • £1m – £2m:   Transact’s initial charge will halve from 0.1%% to 0.05%
  • Over £2m:   Will continue to have no initial Transact charges

From 1st March 2015 for clients with portfolios:

  • Under £1m:   Transact’s initial charge will reduce further to 0.05%
  • £1m – £2m:   Will have no initial Transact charges
  • Over £2m:   Will continue to have no initial Transact charges

You will probably recall that your portfolio size to qualify for these and all other Transact discounts is beneficially based upon the cumulative value of all of your family’s portfolios – including your husband/wife/partner and also your children’s JISAs.

up to 26% reduction in costs

Transact has been our main investment platform provider since 2007 and we are delighted to see that, as their economies of scale increase, they are continuing to reduce their charges for clients.

We have lobbied long and hard with our contacts at Transact for their initial charge to be removed for investors with larger portfolios and are delighted that these are now being phased out.

To give you an indication of how much Transact’s overall charges have come down since 2007, here are a few examples:

  • For a client with a portfolio of £2m investing £200k per annum, Transact’s costs will be 26% lower in March 2014 than they were in 2007.
  • For a client with a portfolio of £1m investing £100k per annum, Transact’s costs will be 24% lower in March 2014 than they were in 2007.
  • For a client with a portfolio of £500k investing £50k per annum, Transact’s costs will be 24% lower in March 2014 than they were in 2007.

A lot has changed since 2007 in the investment platform market.  

Transact in the beginning

Transact first launched in the UK in 2000.  It was the first independent and totally transparent operator in the investment platform market.

Transact charged an explicit fee for its administration of client’s investments and advisers using the platform did too, rather than taking commission.  At the time that was a radical approach.

Transact also allowed access to any listed investment (so called ‘open architecture’) and made no attempt to control or influence distribution of any particular fund.  This too was very unusual at the time.

no kick backs

Until recently, ‘kick backs’ to investment platforms from fund managers were the norm.  The level of ‘kickback’ often depended on the volume of sales through the platform and this funded their operations.

As a fully transparent investment platform Transact has always ensured that any ‘kick back’ received from fund managers was returned, in full, to the client’s cash account.

By the way, future perfect‘s portfolios solely use institutional funds, which do not generate any ‘kick backs’ because they are so low cost.  

The Financial Conduct Authority introduced new rules  in December 2012 requiring investment advisers to charge explicit fees to clients (and not take commission) and ‘kick backs’ from fund managers to investment platforms are now effectively banned1.  

They also now require any ‘kickbacks’ from fund managers that are still received (on legacy investments) to be returned to investors via investment funds and not cash.  They believe that this will ensure that investors have clear visibility of the costs of the fund, platform and advice.  

looking to the future

Although we review the market on an on-going basis, we have found up to now that for many of our clients Transact delivers the best combination of value for money, financial strength, functionality and service.  

However, the market is evolving rapidly and becoming increasingly competitive. Therefore, it is our expectation that with market forces, both investment platform fees as well as fund manager charges will reduce further in the future.  

the photo

It’s of an artwork called Elm Leaf Meander by Walter Mason, a German land artist.  Land artists use natural things to create their artworks, which are often ephemeral.  You can see more of Walter’s beautiful work on flickr and an interview with him on mymodernmet.

any questions?

If you’ve got a query about this, or any other aspect of your finances, Nick would be delighted to help.  You can email him on


1 There are several factors that have brought this about:

  • In March 2013 HMRC declared that rebates/’kick backs’ from fund management companies received by individual investors must be considered as taxable income from 6th April 2013 and basic rate tax should be deducted at source.  The additional complexity of this, together with the Financial Conduct Authority’s impending policy decision on rebates (see below), signaled the beginning of the end for rebates/’kick backs’.
  • The Financial Services Authority (now the Financial Conduct Authority) introduced the Retail Distribution Review with effect from December 2012.   This required that all remuneration received by investment advisers should be ‘customer agreed remuneration’; the taking of commission would no longer be allowed. The FSA/FCA felt that the crediting of clients’ cash accounts with rebates/’kickbacks’ from fund management companies muddied the water and its continued presence compromised the ideals of a commission free environment for investment sales in the UK.
  • With effect from April 2014, The Financial Conduct Authority introduced new rules banning  rebates/’kick backs’ for new investment business (as per its consultation), but also on all legacy/existing business from April 2016. These rules apply to all platforms, whether via financial advisers, banks or direct to the public.

the small print

This commentary is provided for information purpose only and does not constitute advice to invest or not invest.  Advice should always be obtained from an adviser before the decision to invest or sell is taken.  Past performance is not a guide to future performance.