Good Morning Friday 31st March 2023
How are the wishes in a will upheld?
It’s not uncommon for organisations to allow families to club together to earn generous discounts: consider the Network Railcard, National Trust family memberships and the multi-user options on streaming service Netflix. Yet those who want to save or invest money as a family have been poorly served by the traditional wealth management industry. Netwealth, a new breed of wealth manager, wants to change this.
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Netwealth aims to make investing a family affair and has gone one step further by allowing clients to invite their partner, children, siblings and friends into their ‘network’, while each network member’s portfolio remains independent and private. Once in a network, the percentage fee clients pay is based on the combined value of their assets, not on their individual pots.
Netwealth is a modern wealth manager, with a desire to increase transparency and accessibility at the same time as dramatically reducing fees. Clients are often time-poor and are keen to find a way to invest more efficiently.
The firm also appeals to female investors who enjoy the straightforward nature of the service along with the ability to save for different goals. And it is the Netwealth Network which has proved the most popular of all, with 70% of clients belonging to a network.
The Netwealth Network was born out of CEO and founder Charlotte Ransom’s wish to help her own family - not only her husband and children, but her parents as well. The network is a powerful tool to help people invest efficiently across the generations.
Aggregating assets helps to drive down annual fees, while each member of the network can still pursue the financial goals that best suit their age and requirements. What’s more, the minimum investment amount, which is usually £50,000, drops to £5,000 for a network member.
“Everything is transparent which means even someone like me, who is normally frightened of financial matters, feels in control.”
Nell Butler, Netwealth Network member
In its recent study of the asset management market the Financial Conduct Authority, the investment industry regulator, found that “retail investors do not appear to benefit from economies of scale”. Despite pressure to change, the economies of scale are still biased solely towards the fund managers themselves.
Click here for a video which explains how the Netwealth Network can benefit families who club together.
A service that enables families to benefit from pooling their resources while still allowing each individual to invest according to their own needs makes perfect sense. Yet no traditional wealth manager currently offers this service.
This may be because they are then able to charge their clients more, says Henry Tapper, director at First Actuarial and founder of the Pension Playpen blog: “Advisers prefer individual fees, because there’s an awful lot more in it for them.”
In the example above, each individual is already better off by investing with Netwealth compared to with a traditional manager. However, once in a network the rewards grow even more.
If Mary opens a Netwealth account with £250,000, she would pay an all-in annual fee of 0.85% – already far lower than the average UK wealth manager's charge. If she then invites her partner and a parent to the network and they add an ISA of £75,000 and a SIPP pension of £175,000 respectively, the fees would drop to a reduced all-in annual fee level of 0.70%.
Mary’s son could also be added to the network and open an ISA for £5,000, yet still pay the same 0.70% as the rest of the network. He could also increase his savings from as little as £100 a month.
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In this illustration, the family network is paying Netwealth an investment management fee of 0.35%, and an estimated trading charge of 0.05% per annum. The only additional charge is on the underlying funds in the portfolio which should be no more than 0.30% including their trading costs. This brings the all-in annual charges to 0.70%.
If the same family invested individually via a traditional wealth manager, Mary and her husband would each pay an average annual fee of at least 1.82%, according to research by Numis Securities – more than 2.5 times the all-in charge at Netwealth. What’s more, as her son’s £5,000 falls well below the minimum investment threshold set by traditional private wealth managers, he would be unable to invest in this way at all.
The four family members – in this example – would save a combined £4,475 in fees every year by investing with Netwealth compared to the average UK wealth manager. And by taking advantage of the Netwealth Network, they can save a further £1,090, bringing the total fee saving for the family to more than £5,565 a year.
If we assume annual investment returns of 6%, due to the compounding effect of fee savings, over a 10 year period the combined portfolios would be better off at Netwealth by over£84,000.
This family network offering is unique in the UK. No other provider currently offers a single aggregate fee level across family members and friends, while still allowing each individual account holder to pursue their own financial goals.
“Traditional wealth management tends not to cater for families in a way which is economically interesting, other than occasionally in the case of the ultra-high net worth,” says Netwealth’s CEO, Charlotte Ransom. “Our clients can benefit from economies of scale with other family members or friends, while maintaining the flexibility to save in a way which suits their own individual requirements.
Henry Tapper believes this model will prove popular: “There is a gap in the market to cater for individuals keen to get the benefits of investing as a [network],” he says.
Particularly in a low interest rate environment, the potential for family groups or close friends to drive costs down while still pursuing their own investment agenda should come as a unique and welcome change.
Nell Butler has three generations in her Netwealth Network and says, “We all have investments with Netwealth. We benefit from lower fees as a result of the family network while our individual accounts remain private. Everything is transparent which means even someone like me, who is normally frightened of financial matters, feels in control.”
This is a sponsored post written by Netwealth. The opinions expressed in this article are the sponsor’s own. To find out more about Netwealth and their Network offering, please visit their website by clicking here or call their client service team on 020 3795 4784.
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