Early analysis indicates that provided Alliance Trust Savings customers choose the right service plan they can look forward to big savings when switching to Interactive Investor this summer.
Interactive Investor’s revamp of its platform and transaction charges could be good news for the 110,000 customers of Alliance Trust Savings (ATS) set to transfer to the broker this summer.
Analysis in the table below from Interactive (ii) indicates that provided ATS customers choose the right service plan they can look forward to big savings on their current charges.
The figures from Interactive show the total cost of its new platform charge and transaction fees for a portfolio of investment trusts or funds. To keep the comparison simple it has been assumed the investments are held outside an ISA (individual savings account) or Sipp (self-invested personal pension).
|Trades per month||ii Investor||ii Funds Fan||ATS current pricing|
Source: Interactive Investor
Also the table only shows two of Interactive’s three new plans:
- the basic ‘Investor’ plan which costs £9.99 a month and charges £7.99 for most transactions;
- the ‘Funds Fan’ plan which levies £13.99 a month but cuts investment and fund dealing charges to £3.99.
The ‘Super Investor’ plan designed for the most active shares investors and costing £19.99 a month is not shown. For more details of the three plans read this article.
While Interactive admits its existing customers who trade infrequently will pay more, the same is not true for buy-and-hold trust investors from ATS. Provided they chose the ‘Investor’ plan they will pay the same or less then they currently do.
For example, with no buys or sells in a year, the Investor plan holder will pay an annual £119.88 on their trust portfolio compared to £120 at ATS. If they undertake one transaction a month the bill will stay the same, which is cheaper than the £199.92 Interactive says they would pay at ATS.
As their transactions increase, so do their savings. On two trades a month on the Funds Fan plan – where transaction charges on funds and trusts are slashed to just £3.99 – an investor will pay £156.88 a year to Interactive compared to £319.80 at ATS.
At a very active four trades a month, the same plan holder would pay £263.52 to ii, less than half the £559.56 it would have cost at ATS.
ATS, which held £16 billion of assets on behalf of investors last June, was sold by Alliance Trust (ATST) to Interactive Investor for £40 million last October. The transaction still awaits regulatory approval but is expected to complete this summer.
Because of its historic link to an investment trust, ATS was the leading platform for self-directed investors in closed-end funds, although the business had expanded its business to include financial advisers and other types of investment in recent years.
Both Interactive and ATS were unusual in levying ‘flat’ platform fees. Other brokers and fund supermarkets such as Hargreaves Lansdown or Fidelity charge a percentage of investors’ balances so that, like fund managers, their fees grow as their customers’ assets increase.
Many long-standing ATS customers liked the platform because it offered loyalty discounts reducing they transaction fees they paid. However, according to ATS’s website, only customers who have been with it for more than 16 years match the new basic £7.99 dealing charge from Interactive. Nothing comes close to the £3.99 charge on the Funds Fan plan.
Under Interactive’s new tariff, investors get one free trade per month on the Investor plan rising to two free trades on the other two plans. This is less than the four from ATS.
However, ATS charges separate fees for a trading account and an ISA, whereas Interactive doesn’t charge an ISA investor twice for having two linked accounts.
While both charge extra for a Sipp, Interactive’s charge will be lower at £10 a month compared to £21 for ATS (both fees include VAT).
Interactive does not charge exit fees which should make it easier ATS customers to move if they are unhappy after the takeover completes.