The 40% price cut, which came into effect on 1 February 2018, sees the AMC on its five MPS strategies fall from 0.25% + VAT to 0.15% + VAT, which the fund selector claims is one of the cheapest options in the market.
The five MPS portfolios are already constructed from passive instruments in an effort to keep total costs down.
Added to the ongoing charges figure for the portfolio constituents, which ranges from 0.15% to 0.18% depending on the risk level, this brings the new total cost to about 0.33% and 0.36%.
The reduction in AMC coincides with broader changes to its asset allocation process, including a change in benchmark.
Moving forward, the direct to consumer (D2C) firm will conduct its asset allocation decisions in-house for its MPS portfolios that will be benchmarked against Distribution Technology’s Dynamic Planner Risk Ratings. Instead of using the ‘risk rated’ approach, the MPS portfolios will now use the ‘risk targeted’ approach to give advisers and clients greater certainty of ongoing suitability.
Commenting on the changes, Kevin Doran (pictured), chief investment officer and managing director at AJ Bell Investments, said:
“Our aim with the MPS is to deliver a high-quality investment solution to advisers, whilst leading the market on price. We’ve been focusing on making our investment process as efficient as possible and are able to pass the cost savings back to advisers and their clients in the form of lower annual fees.
“We also know that many advisers value Distribution Technology’s Gold Badge risk targeted solutions and so we will be moving to those in order to give greater certainty that the portfolios will always remain within the targeted volatility ranges. This should make it easier for advisers to use the portfolios within their existing business processes and ensure there are no nasty surprises.”
AJ Bell currently oversees £39.8bn in assets under administration for its 164,500 clients. The firm is part owned by heavy-hitting fund groups Woodford Investment Management, Invesco Perpetual and Seneca Investment Managers.
