National financial services and Financial Planning group AFH has from today scrapped platform fees for new clients.

AFH Group chief executive Alan Hudson said the company would in future be absorbing the fees in full with no increase in adviser charges to clients, no cut to adviser remuneration and no change to AFH’s investment proposition or portfolio construction.

The firm vowed to cut fees last month.
 
Existing AFH clients’ platform fees will be removed by 1 November, the firm says.

Mr Hudson said: “Unlike ongoing adviser charges and active fund management, which add direct value to clients, platforms are a dead weight and only subtract from performance.
 
“The FCA’s recent report on the platform market study suggests price isn’t the primary reason advisers pick a particular platform; the service to the adviser is.

“That would be fine if the adviser was paying for it, but they aren’t.
 
“If advisers had to pay for platforms, they wouldn’t be as expensive as they are now.”
 
“On average platforms charge around 0.3% (30bps) a year, which for a client with a £50,000 pension would add up to more than £12,500 over 25 years, slashing the final pot from almost £175,000 to just over £160,000 assuming 5% annual growth.
 
“It doesn’t matter how wealthy you are: would you pay £600 a year on a £200,000 portfolio if you didn’t have to?”
 
He added: “Investment returns are predicted to be lower, which means that money could make a significant difference to a client’s return/cost ratio.
 
“And with the FCA’s focus on value for money, it’s inevitable that adviser charging and particularly ongoing adviser charges will be next on their radar, so increasing adviser charging to include platform fees is not an option.

“I think between the FCA and their own clients, advisers are soon going to be facing some tough questions.

“AFH’s removal of platform fees, combined with our institutionally priced segmented mandates, make for a compelling answer to those questions.”