Interactive Investor is likely to continue to offer a fixed fee to its clients after its acquisition of TD Direct Investing completes.
Last week Interactive Investor said it will acquire TD Bank Group’s European direct investment arm creating the UK’s second largest online broker with assets under administration of £18bn and 300,000 customers.
Speaking to Fund Strategy, Interactive Investor chief executive Adam Seale says: “Flat fee is part of the DNA of Interactive Investor. We introduced it in 2012, even before RDR was designed for platforms.
“If individuals hold assets and every year a certain amount is taking out from those assets to pay the provider, then over the long term that is very bad for their financial wealth.”
Currently the platform charges a standard fee of £10 for UK or international trades, dropping to £5 for regular traders and £1.50 per trade for regular investments with their portfolio service. Customers pay a flat fee of £20 a quarter, which is used to offset any trading commissions.
Seale says: “The percentage charging model over time eats away people’s investment returns and it is always been an important part of our vision to make sure that people are aware of that and therefore this is about transparency itself not only low cost…That message is not fully understood by all investors yet.”
Before the deal receives its regulatory approval, which is set to happen in the first quarter of 2017, Seale says there will be no immediate changes for customers of either Interactive Investor or TD Direct Investing, including changes to fees.
Meanwhile, Seale says achieving scale of £18bn is key for the company to be able to invest in products and technology, but the deal also brings value and quality for customers using TD’s international capability.
He says: “This deal is a huge impetus for our growth putting us forward in the industry. We have grown threefold since 2012 and have grown our assets by 29 per cent as of September year on year.”
Seale says the new business will focus on “taking market share” and growing “as much as we can”.
He says: “This is the creation of a real challenger in the self-investing industry in terms of value and low charges.”
Seale also reassures on the asset migration following the deal saying that both businesses are “very good at asset migration”.
In 2011, Interactive Investor integrated its own client book from an outsourcer, which had around £1.5bn in assets.
TD Direct Investing has also “a good track record “of asset migration, Seale says.
The platform had a recent major move from RBS’ Natwest Stockbrokers in 2014, where around 140,000 clients were transferred.