As I look to the future, I’m focusing on answering the question “what’s driving excellent customer outcomes going forward?” Right now, a big part of the answer to that question is lowering the cost of investing.
If we step back and look at the full picture, it seems like there hasn’t been much enthusiasm in the market lately. We’ve seen low inflation, Brexit, trade wars, tariffs, market volatility, a lack of willingness to invest – and those are just a few of the major headlines.
These factors have contributed to the investment performance we’ve seen over the past year or so. Potentially, for the first time since the financial crisis in 2008, a whole generation of clients that have never known anything other than investment growth, are seeing negative returns. In addition, some clients may now have a clearer view of their investing costs for the first time, as MiFID II statements define fees and charges very clearly.
The convergence of all these events naturally pushes awareness of the costs of investing to the forefront of a client’s mind. So it’s no surprise really that everyone’s scrutinising their costs differently to the way they did when the market was delivering strong returns.
What this downward cost pressure means for advisers is that they’re intensifying the effort to look harder at the value of what’s on offer and make sure each part of the investment service supply chain is adding meaningful benefit to clients.
There’s a fresh commitment to making sure that all the components of the investing process that together make up the overall end-to-end cost for clients are priced competitively. This extends to the cost of the platform that holds the client’s assets and the cost of the assets themselves. This is also an area of increasing regulatory focus, with costs being the one element that is controllable and predictable in times of market volatility.
The new sensitivity to costs has caused interesting developments in the marketplace.
First, there’s a renewed interest in index investing. Historically, there’ve been those who’ve aligned themselves with index funds and those who’ve chosen actives. But with the current market reality pushing businesses to re-examine the economics of investing, the debate about index versus active approaches has been put aside and managers are using low-cost index funds as a portfolio price balancer, allowing more of the available budget to be applied to the active funds that offer the best opportunity for upside.
The effects of cost pressures are visible as well on the platform side of the equation. Those who have been watching the development of the Elevate platform recently will have observed that we’ve reviewed our pricing and have made a significant price reduction.
Elevate can help adviser firms maximise efficiency and deliver excellent client outcomes and experiences, and the repricing of Elevate can help firms to address some of the cost pressures on the platform side of the equation. This approach is a testament to the strength and financial stability of Standard Life, our commitment to support Elevate, and our overall dedication to advisers and to platform innovation.
By supporting adviser firms as they evolve through regulatory change, technology innovation, and shifting client expectations, we’re finding new ways to help people save for their futures. The lower we can drive down platform and investment costs, the more efficient we can help advisers make their businesses and the greater the scope there is for them to deliver a proposition to the client at a price that makes sense.
The value of investments can go down as well as up and could be worth less than originally invested.
The views expressed in this blog should not be regarded as financial advice.