TD Direct Investing, the execution-only broker, is to apply to the City regulator for advice permissions, allowing it to provide additional online tools, guidance and possibly to offer managed portfolio services in the future.
Although it has been discussing the move with the regulator for some time, the move comes the week after the Financial Conduct Authority confirmed its previous policy on the boundaries between advice — which is personal to an individual’s circumstances — and guidance, which is not.
Investment platforms such as Hargreaves Lansdown and Fidelity Personal Investing have already invested heavily in guidance and tools, while Axa Self Investor, another direct-to-consumer platform, has also applied to the FCA for advice permissions.
Alliance Trust and The Share Centre are also working on enhanced online offerings to take advantage of the scope offered by the FCA’s position paper.
John Tracy, the UK head of Canadian-owned TD Direct Investing, said it did not technically need advice permissions to offer guidance. “This is the approach we are comfortable with. We are being conservative.”
Adrian Lowcock, head of investing at Axa Self Investor, said he believes that holding advice permissions should become the norm across direct-to-consumer platforms.
Axa runs a series of fund tools for investors including a risk profiler and model portfolios, and says it is seeking the permissions so it can build on this offering without worrying about crossing the line into fully regulated “advice”.
“It’s more responsible to have this and it makes you more flexible. It’s also about confidence for clients,” said Mr Lowcock.
Mr Tracy said that having advice permissions would also enable the company to enhance its service to individual share traders. He added that while the company’s strategy was not to offer one-on-one advice, managed discretionary portfolios were “on the radar”.
“We have no plans to go there today but it’s something we’re watching with interest.”
Discretionary portfolios are where an investment manager runs a portfolio, either of individual shares or funds, on behalf of a client according to that client’s requirements and risk profile, but does not offer advice on matters such as tax planning.
The company is also revamping its charging structure, scrapping exit fees for Isas and Sipps and removing charges made for dealing in funds over the telephone. The £5 surcharge for international equity trades will also be removed and the account management fee will be £20 every six months rather than £10 per quarter. Mr Tracy said the change effectively meant that a customer could avoid paying it by placing one trade in the preceding six months, rather than three.
Exit fees, where a platform levies an administration charge on those investors wishing to transfer their business elsewhere, have become a big issue since the retail distribution review. Some platforms, such as Fidelity and rPlan, do not levy them at all. Others impose a charge per share or fund, which can quickly mount up for a large portfolio.
Separately, Fidelity has said it will waive service fees on Isas and Sipps for a year and offer cashback to new customers, who must make a lump-sum investment of £2,400 or set up a minimum monthl payment of £200. The offer doesn’t apply to existing customers.
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