Alliance Trust, a favourite of DIY investors, have increased its charges on their Stocks & Shares ISA (Individual Savings Account) in a move that many financial experts believe is a direct result of new FSA (Financial Services Authority) rules to be bought in at the start of 2013.
Retail Distribution Review
The Retail Distribution Review, or RDR for short, will come into effect from 1st January 2013 and will stop platforms, such as Alliance Trust, taking payments from investment funds. At present many investment funds pay part of the Annual Management Charge, which is paid by investors, back to the platform. The FSA believe this practice could create bias and from 2013 it will no longer be allowed, causing many platforms to rethink their business model.
Earlier in the year Hargreaves Lansdown increased their monthly charge for certain low cost funds which did not make a payment back to their platform and Interactive Investor have also increased charges.
It now seems as though the popular Alliance Trust platform is the next to change their pricing model.
Changes to Alliance Trust ISA charges
The changes to the Alliance Trust ISA charges will come into effect from 1st August and will see the annual fee for 33,000 ISA customers rise from £30 per year to £48.
Quoted on the BBC website, Garry Mcluckie, Marketing Director at Alliance Trust, said: “I think what you will find is that many providers will change to a different pricing model,” he said.
“Providers will no longer be able to say ‘we offer free products’ and will have to levy charges instead.”
Many financial experts have predicted that all platforms, which relied on payments for fund managers to form part of their income, will have to change their business model substantially in the face of the RDR. It remains to be seen whether this will lead to significantly higher charges for investors.