On Wednesday, I spent over nine hours on a variety of Virgin Trains in an attempt to get home after a gas leak in Durham closed the East Coast line. I stood up for four of those hours. Normally this would have all made me quite cross.
This week I wasn't bothered. I was secretly pleased, because I had agreed to dress up as Wonder Woman for a photo shoot (I'll tell you more about this in the future). It was scheduled for 4pm. But who's going to wait an extra four and half hours in a cold warehouse in Leith to snap an overtired middle-aged mother in a pair of spangly blue hot pants? My bet, as I hunkered down in my slightly stinky few inches of space next to a Virgin luggage rack, was no one.
I was wrong. This lot have stamina. They were still waiting when my train pulled in. Don't think about the hot pants, advised a friend as I struggled with the red boots. Think about what Wonder Woman would do if she was fighting injustice in the financial services industry instead. So I did. I reckon she would go straight for fees the thing that would surely bother her most about the industry.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Pow! She'd be demanding transparent and low costs across the board. No excuses. However, once I started thinking about my recent visits to and from new players in all parts of the business I began to wonder if this would be a big enough job for Wonder Woman's range of skills.
The fact is that things are improving very quickly even without super heroine input.
Let's start with banks. There is no point in revisiting the models of our high street banks. This lot aren't changing as is evident from the fact that the Financial Ombudsman Service says it has had 53% more complaints about the mismatch of price and value on their packaged accounts in the past nine months than in the previous 12.
But a few weeks ago I went in to visit Graeme Hartop, chief executive at the UK's newest private bank, Hampden & Co. It has much to commend it proper one-on-one customer service, a gorgeously smart office just next door to Nicola Sturgeon's Edinburgh pied a terre and some of the comfiest corporate sofas I've ever known being the most obvious ones.
Beyond the trad front of the bank however, there's some interesting charging innovation. One of my gripes about the way banks normally charge is that, because they like to pretend that most stuff is free, they have to charge fortunes for the few things they admit are not.
So anyone with an overdraft ends up overpaying on that to finance the administration of the accounts of those who are in credit, for example. Not so at Hampden. There, you are charged per service 30p every time you use an ATM, 30p when you get automatic credits (transfers into your account) and £1.50 when you deposit a cheque, for example. You pay for what you do not what other people do. You might quibble with the amounts (this isn't exactly a bank for the masses). But I like the system. It's honest, which in this industry is practically an innovation in itself.
Then there are the many new online wealth managers getting into the game. Take MoneyFarm, an Italian import on the verge of UK launch. It will charge nothing at all as a management fee on the first £10,000 you hold. From £10,000 to £100,000 the fee will be 0.6%. From £100,000 to £1m it will be 0.4%. And after £1m there will be no more to pay. So if you have £1m your management fee will end up being just over 0.4%. If you have £2m it comes down to just over 0.2% (although that does not include the cost of the underlying exchange traded fund investments that comes to another 0.2% or so).
You can argue about the extent to which that offers value (assuming the portfolios do averagely well, I suspect it does). But the thing I like about it is its recognition that the cost of managing £2m is no greater than the cost of running £1m so charging an ongoing percentage fee beyond this, as most wealth managers do, doesn't offer much value to the client.
The same is true of investment trusts and unit trusts: given that the costs clearly don't rise as the size of a fund rises, I am always pleased when I see managers cutting their ad valorem fees as the assets they have under management grow. But there is other innovation in the funds sector beginning to come through too.
Neil Woodford put the cat among the pigeons last year when he announced that there would be no management fee on his Patient Capital Trust. Instead, he is charging an administration fee to cover his costs and then a performance fee of 15% of any gains over a 10% annual hurdle rate (with a high-water mark to make sure you don't pay for the same performance twice).
This week I met a manager going even further. Gary Channon of Phoenix Asset Management Partners has recently taken over running the Aurora Investment Trust. I have high hopes that he can improve on its utterly awful past performance (it has fallen 32% over the past five years, even as the UK All Companies Index has risen 34%) but I really like the way he is putting his money where his mouth is.
The trust now has only a performance fee the managers get one-third of any outperformance over the FTSE All Share Total Return index over a rolling three-year period (again with a high-water mark). Nothing else. Not even an admin fee. Again, you can find things to argue about here if you really try is one-third reasonable? Is it silly not to take an admin fee? But you can't fault the straightforward honesty of the system. All this adds up to excellent progress. A few more years like this and I will be able to hang up my cape. But just the cape; I'm keeping the boots.
This article was first published in the Financial Times
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
