Friends, when they write the history of this time and this planet, there will be but two words seared into whatever the equivalent of The Hitchhiker’s Guide is then. Those words won’t be ‘Mostly Harmless’.

They’ll be this:

Unboxing. Videos.

And that will tell the aliens all they need to know.

This remarkable phenomenon, where people wearing t-shirts open up new things that they have had sent to them for free so that they can open them up on the internet for other people who may or may not be wearing t-shirts but who certainly haven’t been sent anything for free, is at once beautifully meta and culturally horrific. My kids love them, and even I have developed a soft spot for a few of them, such as this one where some dude opens a sandwich underwater for reasons known only to himself.

I think the End Times cannot be far away.

Anyway, the theory behind unboxing videos is that they give us time to consider purchases in an age where we are screamed at to buy more stuff immediately, now, or the chance will be gone forever and so on. Your inboxes have been full of Black Friday / Cyber Monday nonsense, and I’ve been sad to see a few industry folk who should know better loading up the email spam cannon in the last week with 20% off offers and jaunty exclamation marks. No punctuation can ever mask the emptiness inside; participate in this marketing technique and you will feel the cold hand of existential dread grip you tight at 4am, where you can’t even howl because you will wake the just from their righteous sleep and you know in what’s left of your desiccated heart that they deserve better.

Picked up a good pair of boots for 50% off though last week, so at least there’s that.

UNBOXING AJ BELL AND VANGUARD

I mention all this because there’s been a sort of spate of unboxing going on in terms of new product launches over the last few weeks. Now, I do love writing a product review and have done a fair few of them in my time. There is pleasure and a sort of beauty in casting your eye over something shiny and new before it’s been used in anger and its shortcomings revealed. I guess that’s what the unboxers like too.

The two that spring to mind are AJ Bell’s Retirement Investment Account and the new Vanguard Investor SIPP. Neither have launched yet formally, but both have been trailed heavily. AJB launched the RIA at its Investival event last month, and Vanguard hit the press this past weekend.

Both products are more limited in architecture than full SIPPs, though in AJB’s case not by much. Vanguard is accumulation only to start, with drawdown coming in 2021, and of course its platform only offers Vanguard funds.

Both products will cause some brow-furrowing out there, and that’s a good thing. They are pure price plays. In AJB’s case the RIA will take centre stage in the £250k-ish SIPP space, which is crucial for lots of advisers. We wrote some pricing analysis here. As you’ll see from the shortened heatmap below, you’re looking at a nice 0.23% or so for a mixed wrapper (50% SIPP, 25% ISA, 25% GIA) with trading included. Drawdown is also very cheap. If price is a driver, AJB has now made itself crucial to consider.

Vanguard will furrow brows in a different way. Its 0.15% custody / product charge, capped at £375 (so at £250k portfolio size) applies across wrappers and is, quite simply, hella cheap. It’s not quite the cheapest way to buy Vanguard in the UK, but it’s very close and you can’t really argue with that pricing shape. If you hold LifeStrategy, for example, on HL or another fully priced D2C platform, you can cut your custody charge by 2/3rds. There are plenty of, say, £300k SIPPs on HL; 0.45% of that is £1,350 vs £375.

Here’s another thing. Lots of advisers use LifeStrategy on advised platforms. It’s regularly in the top selling lists. A typical adviser platform costs 0.3% or so. How does a Vanguard-supporting adviser keep recommending their usual advised platform over the Vanguard offer? Double the money or more for the same thing? That’s a hard sell. Of course, the Vanguard platform doesn’t integrate with adviser back office systems, and doesn’t do adviser charging. So it’s less convenient for the firm – but potentially a big saving for the client. “Mrs Client, would you like to pay £1,500 for your £500k portfolio per year over here and my 1% / £5,000 fees will come to me direct from the platform, or £375 over here and pay me £5,000 directly each year?”

THE BOX IS NOT ENOUGH

The most important thing will be that service is good – we’d expect that from AJB, but Vanguard is an unknown quantity here and we have heard mixed reports from direct customers so far. The product is FNZ under the hood and we expect it to be signatureless and smooth, but that support has to be there if it’s to unseat HL Vanguard holders, which must be at least part of the game.

Price is generally a very bad determinant of flow in the direct market; the most expensive offerings are normally the most popular. See HL, St James’s Place and so on. It’s a bit different in advised world, but price alone isn’t enough to tempt most firms. It’s got to work.

Finally, these offerings, while welcome and certainly disruptive on the price front, are just a stepping stone. Look over the water, and you’ll see that the real price is dropping to free. The model is a bit different there, with trade commissions replacing our normal platform charge, but the end destination is the same – especially if you’re using the house investments.

Lots of change coming, friends. Have your wits about you.

UNBOXING HANDY LINKS

• the lang cat’s annual Guide to advised platforms should be out next week. It’s called ‘THE VALUE MYTH: STATE OF THE PLATFORM NATION’ and it’s a monster. Keep your eyes peeled, and if you were one of the over 400 firms who filled out our adviser census a few weeks ago, your free copy will be hoving into view shortly.
• Are you ready for SM&CR? No, you’re not. Jacqueline Lockie is sad about that and you might be too if you don’t get a bend on.
• I’m excited about The Big Exchange, launching next year. One to watch.
• And your music choice was always going to be Black Friday by the ever unpredictable Faith No More. So it’s Black Friday by the ever unpredictable Faith No More. Enjoy.

See you next week

Mark