The law of unintended consequences follows regulation like seagulls chasing trawlers, and so far one of the most negative side-effects of the Retail Distribution Review (RDR) has been to sting the pockets of those who can least afford it – small investors.
Monevator readers have registered their complaints loud and clear, as new platform fees, custody charges, and fund dealing costs have weighed down returns that are hardly blazing as it is.
But your pain hasn’t gone unnoticed.
Discount broker Interactive Investor (iii) has contacted Monevator to say it would like to hear your ideas about how it can improve its service.
You’ll remember that iii’s RDR cost hikes caused quite a furore recently.
Previously, iii had been one of the most passive investor friendly platforms in the UK. One price rise later and many Monevator readers were heading for the exits.
If it’s broken, fix it
So how do you think discount brokers should serve investors in a post-RDR world – where platforms can no longer rely on fund providers to pay them commission from a fund’s TER?
Even if you’ve never used iii, you probably have an opinion about online brokers. What would your dream broker be like?
Most here will have experienced frustration, confusion, or poor customer service at the hands of an investment platform. Information is often harder to extract than North Sea oil, responsibilities are opaque, and many brokers are like debt – easy to get into but hard to get out of.
There may also have been times when you agonized over an investment decision, and wished your broker offered easy-to-use tools that made life easier.
It would be easy to say: ‘I want all my services for free. In fact, no, as I’m so special, you must pay me to join you and guarantee my investment returns and send me chocolate hearts whenever I’m slightly down in the dumps.’
But well, that would be too good to be true, and no-one (sane) begrudges a business’ right to turn a profit.
My own broker wishlist is pretty extensive, but I’ll kick off the discussion with a few thoughts:
- Charge small investors a percentage fee to hold their funds rather than a flat rate.
- If that’s too costly then provide small investors with preferential rates on ISA accounts only – encouraging investing in the first place will surely benefit brokers over the longer term.
- Sell discounted bundles of trades that an investor can buy upfront and then use over the course of a year.
- Offer an X-Ray scanner that analyses and compares funds in a portfolio.
Those are a few of my ideas, but we’d love to hear yours. This is a unique opportunity to make yourself heard by an interested party who can improve our investment lot. Maybe together we can conjure up the best online broker that’s practical in the real world.
Rant if you need to – by all means tell ’em where they’re going wrong – but then let’s have your ideas for where they could be going right.
Take it steady,
Note: There is no commercial angle to this post for Monevator. Interactive Investor approached us because it wants to hear the ideas of our investment community. If this helps iii and anyone else who is listening to improve services for small investors and to understand our views, then that’s all to the good.