When it comes to personalisation, most customers select between 21 static asset allocations or build the asset allocation they desire with our custom portfolios. All our clients are on their own rebalancing schedule and we even customise the onboarding process we take you through. With regards to cost we believe we are already a cost-leader in the industry. We have recently reviewed and updated our model portfolios, both diversifying our asset allocations and reducing the costs to our clients even further. On the tax-aware front, we recently implemented Platform features to enable investing in two lines of ETFs per index/asset class. This was to enable shifting contributions between similar ETFs when more effective options become available, laying the groundwork for more tax-aware rebalancing in the future, and many other options to further customise your bespoke portfolios.
We're going to make it a lot simpler to for clients to select their asset allocation style
It is with this focus on developing an offering that aims to exceed your expectations that we also recently launched an improved suitability review process, where you are automatically asked to review your asset allocation on a frequent basis. This review process by its very nature requires you to be satisfied with the asset allocation and the risk that your portfolio is taking. Selecting the asset allocation yourself and being able to review the mix of bonds and equities, and therefore the risk, can be far more understandable when compared to a dynamic portfolio that has created an asset allocation based on Modern Portfolio Theory. In fact, as Modern Portfolio Theory frequently produces non-intuitive asset allocations, the target allocation can be quite different from expectations in some instances. This can make the review process difficult for our clients and we’ve seen this expressed quite clearly both in customer feedback and in where they have allocated their resources. Our starter portfolios are by and large our most used portfolio management style, particularly for new clients.
Therefore we are not only listening to our clients in what they want, but continuously pushing our service to be more personalised, straightforward, cost-effective and tax-aware. It is with this in mind that we are evolving and simplifying our portfolio management solution and goal creation process in the way we believe our customers prefer. We will no longer offer 3 investment styles as choices, because customers prefer to think about our offering in terms of a simple portfolio to start low cost investing in a few minutes and then adjust options we offered in investment plan and custom goals styles as they go along.
We plan to make it a lot simpler to for clients to select their asset allocation style. All new Portfolios will start as starter portfolios. This allows anyone to simply select a fixed asset allocation portfolio that matches their risk profile. From 100% equities to 100% bonds, we offer 21 portfolios in three currencies. For our more sophisticated investors, who want to build their own asset allocation, you will be able to choose a custom portfolio as a second step in your journey. Not only will this make our offering more straightforward, but also allow us to offer more personalised investment management (rebalancing and ETF selection) over time. This shift will allow us to also focus on offering more personal tax-aware portfolios in the future, all while aiming to make it more straightforward for our clients to review their portfolios for suitability.
With regards to being more cost-effective than before, this shift allows us to reduce costs even further for you. Our new annual management fee will move from 0.5% to 0.48% for portfolios below GBP/USD/EUR 25K. For portfolios above 25K, we are reducing our fees from 0.30% to 0.29%. Which given a 12 basis points average Total Expense Ratio across portfolios, adds up to a total cost of less than 0.60/0.45 VAT included!
Our goal has always been to offer our clients a world-class investment solution that becomes more and more tailored to them over time. We believe this increased focus, along with the exciting work we are doing in the background, is all about realising this. We have updated our whitepaper to reflect this change and look forward to revealing additional customisation options in the months ahead.