The analysis was carried out on behalf of Skandia and involved comparing the total cost of various ISA and pension portfolios invested in popular portfolio management services with similar asset allocations, across different investment platforms.
The Lang Cat found that the cost of similar services can vary by as much as 66% over ten years, with a £75,000 investment in a pension having a total cost of ownership ranging from 1.12% per annum for the cheapest to 1.86% for the most expensive.
Skandia hopes its ‘portfolio pricing report’ will highlight the issues in identifying the true costs of similar services. It warned however, that with some portfolio management services it is very difficult to obtain the underlying data such as asset allocation and investment costs, even for research specialists let alone retail investors.
The investment firm said this has created a situation in which the post RDR adviser industry is highly transparent itself, but is being undermined by some of the portfolio management services which many advisers are outsourcing investment to being very opaque.
“Outsourcing portfolio management can provide a great customer outcome and, as a result, is an increasingly popular option for advisers,” said Tom Hawkins, Skandia’s head of UK proposition marketing. “In order to make portfolio management services more accessible to customers we believe there needs to be greater transparency around total cost of ownership so customers can understand what they are paying,” he added.
“Sometimes good research tells us what we know already – and in this case we were pleased to be able to show that simply focusing on one element of cost when building portfolios just won’t do,” the Lang Cat’s Mark Polson said.
Skandia says the new managed portfolio service within its WealthSelect offering has been designed to simplify the comparison process for advisers and customers.
