Well, the quiet start to the year didn’t last long, did it? I’m not even down the Christmas chocolates yet, let alone the Oloroso lake I’ve given the basement over to. So we’d better get to it this week, whimsy will have to take a back seat. What’s that, whimsy? You don’t want to sit in the back seat? Shut up. Shut up, whimsy. Shut up.  Stupid whimsy.

Loads going on; let’s concentrate on the biggest story of the last week which is of course Vanguard warming up to enter the financial advice space in the UK.

Now, we don’t know what the proposition is going to be yet; clearly it’s only going to punt Vanguard funds, but there are quite a lot of those and quite a lot of people think they’re really rather good, especially going by lists of top selling funds on lots of adviser platforms.

I’ve spoken to a few advisers about this, not least at a fun PROD event in Glasgow yesterday with Copia, and there’s a sort of understandable but reflexive ‘won’t affect me, guv’ thing going on. The thinking is that folk who seek advice from ‘traditional’ advisers won’t be interested in a phone-based or web-based service from The Guard o’Van.

This might be true. But I can’t help thinking about the American VPAS service, which is impossible to write about in AUA terms because it’s going up so fast; while typing this para they’ve probably added on more than the whole robo sector in the UK has done to date (more on that below).

That service is much more sophisticated than folk are saying it is, especially those dismissing it as a sales funnel for VG funds. It is that, to be fair, but it’s quite a lot more besides.

For a start you get financial planning. Over the phone, unless you’re pretty rich (and lots of VPAS investors are, plenty of $10m portfolios knocking around), and it can’t do everything an RIA can do, but it’s not bad. I don’t know if they’ll knock up a cashflow model or not. I do know that if, for example, you have a bunch of shares you don’t want to sell or can’t for tax reasons, their algorithm will amend the portfolio they recommend to take account of that.

So you get the ‘platform’ (not really), a nice portal, a nice qualified adviser who gives you a degree of planning, and all your funds and tax optimisation nonsense that goes on in the States.

This costs 0.3% a year all in – funds and everything – and now runs in the region of $150bn.

I think the key point here isn’t that RIAs are getting slaughtered by VG – some might be but as is always the way if you have great relationships with your clients then they won’t cross the floor. If clients do move, there’s clearly a deeper dissatisfaction and the firm needs to look to itself before moaning about competitors.

However, the total ‘stack’ cost for an RIA isn’t far off that of an IFA – you’ll often shoulder a total cost of ownership approaching or around 2%, which isn’t at all unusual here. Let’s say 1.8% for ease.

So as a client you have a new choice. You can keep paying 1.8% and getting what you’re getting; a nice independent adviser who, if you’ve picked well, will do lots of holistic stuff, a big chart with red and green bars on it and more. Or you can pay 1/6th of that and get most of it without the extra nice bits.

America isn’t the same as Britain (but ask me again in 5 years). But I do wonder if the UK investor is offered a ‘proper’ advice service – not full financial planning, but decent advice – which ends up in low-cost, non-toxic products, which comes in at (say) 0.3% all in, whether that won’t drive some to work out what it is they really want. It might be good news and lead to clients recommitting to their adviser if they had been wavering but weren’t sure what else was out there. Or it might be less good news.

Whatever, I suspect there will be lots to watch here.  I’ll be giving the D2C market, especially HL, a hard stare, and the remaining robos too. If VG does launch with something aggressive, we will learn some very interesting facts about price sensitivity and how it can change – or not – over time.

PLEASE BUY A THING

Yep, still punting the 2020 lang cat advised platform guide. If you’re a sort of normal-sized adviser firm (about 10 or fewer RIs) then it’s yours for £200 plus the tax. You’ll need a discount code to get that rate which I’ll happily supply if you email me on mark@langcatfinancial.com or DM me on Twitter. Tonnes of good stuff in there.

You can buy the Guide here, and the Universe will love you for it.

LINKS SHOULD NOT BE CONSTRUED AS ADVICE

• #robodown – this time it’s Moo.la, which was bought by JLT which was bought by Mercer and now no-one wants the robo that turned over £3,768 in the period from 1 May to 31 December 2018. The website is still live, but I guess that doesn’t really matter too much. All very sad, lots of effort went in, but surely the trail of dead in this space demonstrates once and for all Polson’s Third Financial Precept, which is ‘it is very hard to get people with no money to invest it.’
• AJ Bell’s new RIA proposition is making the headlines – we wrote about it here. I’m going out on tour with AJB soon to talk about this and other nonsense; you can find dates and venues and stuff here.
• Looks like our new Platform Analyser tool will be ready in 2 weeks. We’re adding a bit of functionality our lovely first adopters told us they wanted; when that’s done we will be rocking and rolling. If you’d like to know more then go here and we’ll tell you when it’s ready.
• And your music choice this week takes us back to the title of this week’s Update and associated ridiculousness. Please do enjoy Hits From The Bong by Cypress Hill. You are most welcome.

See you next week

Mark