You buy cheap, you buy dear

It’s a phrase my wife uses a lot, mainly to justify things we don’t need to be fair, but it always comes back when we (or as she points out I) have scrimped a few quid on something and it invariably breaks!!  We then get a new, more expensive one!

Much is made of price in the industry, how many bps is too many for a platform or a service?  Whilst the debate happens in the profession I see it less than I do in the industry.  The larger “distribution groups” will try and continue to squeeze, in an attempt to add value.  But in my experience of meeting advisers most recognise there is a fair price to be paid for providing a platform service or a tax wrapper.  Each will have a view on fair, but I never really had that much debate on absolute price of solutions.  Lots on complexity, and for sure that needs to be addressed across the board.

But for your average client you need to consider what is a fair price and importantly what value you get – read another great blog from The Lang Cat here – the illusion of premium.

The key point Mark makes here is understand the value, there is a hint of we need to drive the price down too though.  I’d be wary of this, for sure at top end it does need to come down, and perhaps some cap on the amount over and above is the way.  But for the average investments on a platform, which will range from £150k to £250k does 5 bps make a huge difference, does even 10?  5p in every £100 invested.  I worry if we drive headline price down too much  we will create every more complicated models as others strive to preserve margin.  I know for sure The Lang Cat will pounce on that like an eagle on a fruit bat (watching too much of Africa lately). But it would still happen.

This might sound like some industry guy trying to protect the margins of the big guys, and that might be a fair criticism, but I believe there is much more development needed in the platform space.  If price is driven too far too fast then expect quality to suffer, expect development to suffer, expect innovation to suffer.  Great credit to Nucleus who has done what others promised to do with protection.   I suspect that might have been a struggle with a cheaper offering.

Regulation will continue in this space and the complex rules of client money alone I suspect will be set to challenge many providers.  Let alone other rules that will be brought in to create transparent complexity!!

So for the profession I’d continue to challenge the value and the industry start to really articulate it.  But be wary of bargain buys or too good to be true prices, you can’t just go and get a new platform!

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