Interactive Investor adopts Netflix-like monthly flat fee pricing model

by Moira O'Neill from interactive investor |

-    Flat fee model retained but offers greater pricing choice
-    Trading fees significantly reduced across all pricing plans and to a market leading £3.99 in some price plans
-    Analysis by the lang cat suggests investors could save more than £30,000 in charges over 30 years when compared to our largest competitor 

interactive investor, the leading flat-fee investment platform, is to replace its quarterly fee with a flat monthly fee, enabling customers to choose a more tailored approach that suits their needs. 

In a revolutionary move for the investment sector, interactive investor customers will be able to choose from three Service Plans: Investor (£9.99 per month), Funds Fan (£13.99 per month) and Super Investor (£19.99 per month).

The plans are designed to meet different customer needs and create a more personalised investment service. 

The Investor service plan offers lower trading costs than customers pay today (£7.99 versus £10 previously). Trading costs on the other plans have been slashed further to a market leading £3.99.

Richard Wilson, Chief Executive, interactive investor says: "Our flat fee structure lends itself to this much more intuitive, personalised, monthly pricing model. Each service plan has a fixed monthly fee with reduced ultra-low trading fees to suit different investment styles.

"We are best value for investors with more than £50,000, roughly in line with the average stocks and shares ISA balance (£51,306, according to HMRC), with life-changing cost savings to be made over the long term. We don't think that one price should fit all, and most other industries – apart from the financial services sector - have long recognised this.

"Paying through monthly subscriptions pricing is familiar to so many people and in so many areas of our lives, from streaming media services, to fitness and personal training memberships and mobile phone bills. We believe people should be able to pay for their investment services in the same easy and modern way and our research show that this is what they want to do. The financial world needs to catch up and we are leading on this."

Fair flat fees - key features and benefits:

  • Choice of 3 Service Plans to suit different needs, with as many accounts as investors want under one Service Plan 
  • Online transaction fees cut across the board 
  • One simple fee covers investors for multiple trading, ISA and Junior ISA accounts (SIPPs continue to have an additional monthly fee, which will be £10 per month)
  • Each Service Plan gives investors back a free credit of £7.99 each month
  • Each free credit is available for 90 days 
  • Flexibility to change plan quickly and easily online 
  • Each Service Plan gives access to the same great service, range of investments and award-winning insight.

interactive investor Service Plans from 1 June 2019

Investor Funds
Fan
Super
Investor
£9.99 per month

Our core plan for investors looking to get the
best choice and insight in the market
£13.99 per month

For investors looking to build a portfolio of
funds or investment trusts
£19.99 per month

Our premium plan designed for more frequent
investors, with market leading trade fees.
1 FREE trade per month



UK share and ETFs £7.99

Funds and investment trusts** £7.99

US Shares £7.99

Other international shares £19.99

Dividend reinvestment £0.99

Regular Investment £0.99
2 FREE fund*
trades per month


UK share and ETFs £7.99

Funds and investment trusts* only £3.99

US Shares £7.99

Other international shares £19.99

Dividend reinvestment £0.99

Regular Investment £0.99
2 FREE UK/ETF/fund*
trades a month


UK share and ETFs only £3.99

Funds and investment trusts* only £3.99

US shares only £4.99

Other international shares only £9.99

Dividend
reinvestment £0.99

Regular Investment £0.99
*Funds trades
covers OEICs, unit trusts and investment trusts.

**Our list of
investment trusts is based on that provided by Morningstar.

Note: Exchange Traded Funds (ETFs) are treated
as shares.

Interactive investor’s current charges (to be replaced on 1 June): Flat fee of £22.50 per quarter which is returned as trading credits. Transaction charges: £10 per trade (standard) and £6 for frequent investors (average of 10 trades a month in last 3 previous months). US share trades: £10 per trade (standard) and £6 per trade (frequent); other international trades are £20 (standard) and £16 (frequent).

Moira O'Neill, Head of Personal Finance, interactive investor, says: "Most people's regular payments tend to be monthly, so this new pricing structure fits in much better with customers' personal finances. In launching a choice of packages, we have taken inspiration from beyond the financial services sector - entertainment streaming services and mobile phone companies have long offered a personalised selection. 

"Whilst these revolutionary flat fees mean you get better value in the long term, not everyone will feel immediately better off.  This is because the flat fee has increased, while trading fees have been cut across the board. So, it is investors who most actively engage with and manage their investments who will benefit the most. While the monthly fee effectively goes up by £2.50 in the Investor package, the trades cost goes down by £2.

"Using the Investor package as an example: a customer who doesn't trade at all over the year will pay £30 per year more for their new interactive investor flat fee. But if they traded once a month, they would be paying exactly the same as before. An investor trading twice a month on Investor versus the old pricing plan would save £24 a year. 

"This new structure represents excellent value for money, as research from the lang cat demonstrates. Customers will also get a minimum of one free trade a month, compared to just two a quarter previously, and these can be rolled over if not used. This allows our customers to get the most from their investments, whether rebalancing their holdings by topping up or selling existing holdings, or taking advantage of dips in the market to buy bargains."

View from the lang cat

Steve Nelson, Consulting Director, the lang cat, who has scrutinised interactive investor's new charging structure says: 

"Our research shows that there are potentially significant savings to be made should a customer adopt a platform with a fixed fee approach as opposed to uncapped percentage-based charges. Of course, this is simply basic arithmetic in action and it will depend on individual circumstances such as trading levels, contributions and investment types but such savings can add up to thousands of pounds over a medium to long term investment. 

"There is tonnes of research out there that shows that customers struggle to engage and understand the charges that apply to their investments. What we like in particular about the new interactive investor structure is the fact that the customer will face a clear, easy to understand, fixed platform charge per month."

How do the new charges compare to competitor charges over the long term?

Research by the lang cat into the long term benefits of interactive investors' new fees shows that over 30 years, investors could save more than £30,000 in charges when compared to our largest competitor, assuming an average stocks and shares ISA balance (£51,306, according to HMRC), with annual top ups of £10,124 (annual average top up, according to HMRC). 

This saving is more than the average UK salary of just under £30,000, would pay for one of the best SUV cars on the market and almost entirely help a child or grandchild with the average deposit on a first home, (£33,127, according to Halifax).

For bigger portfolios, this benefit gets even better as flat fair fees save you even more.

In the interactive investor SIPP, the lang cat research shows that over 30 years, investors could save more than £20,000 in charges when compared to our largest competitor, assuming a starting SIPP pot of £150,000 with no further contributions.

Both scenarios are based on the Investor price package, with other comparisons in the notes to editors across the three packages. The research assumes a 5% annual return in the portfolio after investment charges, with the return applied monthly, and assumes a 50/50 split between funds and shares (individual shares are UK). 

Methodology of the lang cat research 

•    Assumes a 5% annual return in the portfolio after investment charges, with the return applied monthly 
•    Assumes a 50/50 split between funds and shares (individual shares are UK), with exception of Funds Fan illustration, which is 100% funds.
•    Costs calculated over a 30-year period 
•    Contributions assumed to be wholly invested on the first day of the month, with additional funds used to cover costs, this is represented by the net investment value after the end of the period 
•    Trades were assumed to be conducted on the first day of the month 
•    Costs for percentage-based platform fees calculated on the value of the portfolio at the end of the previous month, after returns have been applied 
•    Where multiple trading options exist, eg The Share Centre, the most cost-effective option was used in each scenario 
•    Costs not to include any initial set-up fees or temporary offers, such as a lower charge in an initial period of being a customer or discounts because of transfers 
•    Where yearly/quarterly maximum fees existed, i.e. for holding shares – if the charge per year/quarter exceeds the yearly/quarterly maximum fee, then the maximum fee to be spread out across the year and applied monthly. 
•    The research does not take into account inflation.

About interactive investor

interactive investor (ii) is the UK's number one flat-fee investment platform. ii offers a wealth of unbiased information, analysis, tools and expert ideas to help customers make better informed investment decisions. ii’s award-winning trading platform provides access to an extensive choice of markets, instruments and currencies within Trading, ISA and SIPP accounts. This comprehensive investing service is underpinned by a strong focus on delivering great value for investors demonstrated through an innovative and competitive pricing model – featuring simple, flat fees and unique ‘trading credits’. interactive investor is authorised and regulated by the Financial Conduct Authority.

Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation. Past performance is no guide to the future and the value of investments can go down as well as up and you may not get back the full amount invested. 

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