Chelsea Financial Services emphasises fund research and performance but with price plans more expensive than rival platforms

27th February 2014

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Chelsea Financial Services has announced its new pricing plans, the last significant player in the market to do so.

For the first £250,000 of investments held investors will pay 0.4% to Chelsea and an additional platform fee of 0.2% to Cofunds, which powers the proposition. There are no charges for transactions and nor exit fees.

In a statement accompanying the announcement, Chelsea said: “Charges are extremely important. That’s why Chelsea pioneered discount broking and started reducing initial charges to zero for our clients over 30 years ago. We remain committed to giving our clients value for money”.

“Equally important are investment returns after charges, quality service, reliability and predictability – no-one wants surprises when it comes to their life-savings. We are not slashing prices just to play the volume game; we want the best possible outcome for our clients.

“So while Chelsea will always try to keep costs as low as we can for our services, the platform we use and the funds we rate, it won’t stop us selecting a fund that is perhaps more expensive than it’s peers if we think long-term returns will prove to be much better”.

Chelsea’s price list

Up to £250,000 held with Chelsea
(combined amount across all products and wrappers):

Cofunds’ platform fee reduced from 0.25% to 0.20%
Chelsea’s fee reduced from 0.50% to 0.40%
Total reduction in annual fees 0.15% 

Amounts between £250,000 and £500,000
Cofunds’ platform fee reduced from 0.25% to 0.20%
Chelsea’s fee reduced from 0.50% to 0.35%
Total reduction in annual fees 0.20% 

Amounts between £500,000 and £1m
Cofunds’ platform fee reduced from 0.25% to 0.20%
Chelsea’s fee reduced from 0.50% to 0.30%
Total reduction in annual fees 0.25% 

Amounts between £1m and £2m
Cofunds’ platform fee reduced from 0.25% to 0.15%
Chelsea’s fee reduced from 0.50% to 0.25%
Total reduction in annual fees 0.35% 

Amounts over £2m
Cofunds’ platform fee reduced from 0.25% to 0.15%
Chelsea’s fee reduced from 0.50% to 0%
Total reduction in annual fees 0.60% 

Chelsea is also highlighting the track record of its research.

It adds: “Chelsea’s Core Selection funds have returned, in total, 45% more than the average fund in a comparable sector (IMA Flexible Investment) over the past decade*. That’s after charges, and shows the value of good, independent fund research.

“Nor will Chelsea cut back customer services. Personal, quality service, no matter how people chose to deal with us, are part and parcel of why our clients stay with us and recommend us to their friends and family. This will not change and we will not penalise anyone for the way they choose to invest.

“We are also investing heavily in a new website with extra tools and investment guidance for the increasing number of investors either wishing, or being forced, to take control of their own financial futures”.

Specialist investment platform consultancy the Platforum points out that the move puts Chelsea at the expensive end of the market and published several tables illustrating the point.

Assets between Chelsea fee Cofunds fee Total fee
£0-£250k 0.40% 0.20% 0.60%
£250k-£500k 0.35% 0.20% 0.55%
£500k-£1m 0.30% 0.20% 0.50%
£1m-£2m 0.25% 0.15% 0.40%
£2m+ 0.00% 0.15% 0.15%

Holly Mackay, managing director of The Platforum, says: “This is a tricky move for Chelsea who have the Cofunds mouth to feed as well as their own – 60bps certainly puts them at the expensive end of the market. We do like their research and investor newsletter but I’m not convinced that it’s worth the premium. As a platform without access to shares and an integrated SIPP, this restricts them to the less complex and confident investor who wants a helping hand in navigating the fund world. Quite how price sensitive their customers are remains to be seen.”

However Chelsea Financial Services managing director Darius McDermott is focusing on the fact it doesn’t levy additional charges listed below.

No additional charges – just simple, predictable pricing
Telephone dealing X Duplicate tax certificates X
Paper statements X Ad hoc paper statements X
Online dealing X Sale of investments X
Exit fees X Registration of legal documents X
Probate valuation X Payment by cheque X
Re-investing income X Paper contract notes X
Investing via direct debit X
All the above actions attract charges from other companies – it pays to read the small print

McDermott adds: “There is always someone who will do a job cheaper, but that doesn’t mean they’ll do it better. It pays to read the small print that comes with some of the so-called low-cost deals which have been announced in the past few weeks. With Chelsea, there are no additional charges, just simple, predictable pricing.

“When it comes to fund research, we have proven added value and independence, with our Core Selection returning 45% more over a decade than its comparable sector – that’s 2.3% per annum compounded*. We are not going to compromise this by recommending cheaper funds just to save a few pounds here and there. We have integrity in our fund research, which is valued highly by our clients, and that’s something I’m not willing to sacrifice”.

Platforum has also published a comparison with other platforms showing the costs of holding example portfolios of £10,000, £20,000 and £50,000 with some of the leading platform providers in the UK today. It says that these costs are illustrative only and will depend on the investments held, the number of trades made and other specific activity-related charges a platform may levy. Only the platform charges are shown – annual fund charges, which often differ between platforms, are not.[1]

The note continues: “Chelsea Financial Services is clearly one of the more expensive platforms but they do cater for customers who don’t want to do everything online. They also point to the impartiality of their fund research which some customers will value. They don’t have hidden extra charges which can add up and, unlike many competitors, they don’t levy an exit fee. For portfolios above £50,000 they are quite pricy and clients can’t hold shares or a fully integrated online pension (SIPP) which some larger investors will want.”

Price comparison table for leading UK platforms for non-advised investors

£10,000 £20,000 £50,000
AJ Bell Youinvest £39.80 £59.80 £129.70
Alliance Trust Savings £140.00 £140.00 £165.00
AXA Self Investor £35.00 £70.00 £175.00
Barclays Stockbrokers £35.00 £70.00 £175.00
Bestinvest £40.00 £80.00 £200.00
Charles Stanley Direct £25.00 £50.00 £125.00
Chelsea Financial Services £60.00 £120.00 £300.00
Fidelity Personal Investing £35.00 £70.00 £175.00
Halifax Share Dealing £62.50 £62.50 £87.50
Hargreaves Lansdown £45.00 £90.00 £225.00
Interactive Investor £80.00 £80.00 £80.00
rplan £35.00 £70.00 £175.00
TD Direct Investing £35.00 £70.00 £175.00
The Share Centre £87.60 £87.60 £102.60
Willis Owen £73.00 £146.00 £365.00

A table highlighting the lowest cost options is shown below:

Price comparison table for leading UK platforms for non-advised investors – lowest cost options

£10,000 £20,000 £50,000
AJ Bell Youinvest £39.80 £59.80 £129.70
AXA Self Investor £35.00 £70.00 £175.00
Barclays Stockbrokers £35.00 £70.00 £175.00
Charles Stanley Direct £25.00 £50.00 £125.00
Fidelity Personal Investing £35.00 £70.00 £175.00
Halifax Share Dealing £62.50 £62.50 £87.50
Interactive Investor £80.00 £80.00 £80.00
rplan £35.00 £70.00 £175.00
TD Direct Investing £35.00 £70.00 £175.00
The Share Centre £87.60 £87.60 £102.60

Mackay adds: “These pricing charts should be treated with some caution as they don’t tell the full story or address individual suitability. Investors should also ask themselves how they feel about the financial security of their platform, the research and analysis the platform provides and the overall service too. We do rate Chelsea as one of the better groups for presenting fund research to customers in a clear way which is easy to digest. Nonetheless, we think that the 60bps headline fee, coupled with no access to shares or integrated SIPP, makes this a very difficult case for Chelsea to make to the broader self-directed market at the same time as the consumer spotlight is focussed more than ever on costs.”

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