Mon. Dec 6th, 2021

Investors will be able to give accounts to friends and family for as little as £ 1 a month, in an effort by the UK’s second largest retail investment platform to win the loyalty of next generation savers.

Interactive Investor said clients would be able to give “friends and family” bills at a monthly fixed fee of £ 5 to five, allowing the new recruits to buy shares and funds, as well as open tax-protected investment vehicles.

The move comes as the wealth and investment industry prepares for a major transfer of wealth from baby boomers born before the 1960s to millennials born in the 1980s and 1990s. According to Brooks MacDonald, a wealth manager, £ 327 billion will change hands in the UK over the next decade.

Investment platforms face competition from a range of youth-friendly investment and trading companies as they seek to recruit Millennium and Generation Z clients, some of whom are drawn to higher-risk products, such as cryptocurrencies.

Richard Wilson, CEO of Interactive Investor, which – unlike opponents Hargreaves Lansdown and AJ Bell – charges fixed fees rather than a percentage of clients’ assets, said the “friends and family” plan would open up the broker’s services to a “much wider audience”.

“Simple fees do not lend themselves so well to smaller amounts that are invested – where a percentage fee can be more competitive – at least in the early days. “Our friends and family launch solves this problem,” he said.

The broker, who is in conversation with sells itself to Abrdn for about £ 1.5 billion, launched in 2019 what it called A “Netflix-like” subscription pricing model with three levels of services. The company holds around £ 55 billion for its retail clients, making it the second largest UK investment platform.

Just as parents may share video streaming accounts with their families, Interactive Investor now hopes to involve its subscribers’ adult children and other young investors.

Oral plays a key role in driving growth for investment firms, who often spend a lot to convince new clients to trust them with their assets. For example, Freetrade, a low-cost UK stock trading service, distributes free shares to clients who refer their friends.

Family-oriented offerings are more common among wealth managers, who often manage money for entire family groups or advise clients on handing over wealth to the next generation.

Quilter, a wealth manager that offers clients investments through financial advisors, launched a “family link” in 2020. By merging portfolios, families benefit from lower fees under the level fee structure, as they can access a higher level. About half of its customers have now taken advantage of the feature.

Netwealth, an online wealth manager, also enables clients to connect with friends and family to benefit from lower percentage fees based on the combined value of their investments. The company has reduced the minimum investment amount for members of these linked account “networks” from £ 50,000 to £ 5,000, making it easier for younger investors to access.

Nearly half of the new accounts that Interactive Investor handed out during a year-long launch of the friends and family plan went to under-35s, compared to an average age of 57 over its 400,000 clients. Nearly 70 percent of the new connections were women, compared to about 30 percent of existing customers.

Clients using friends and family accounts can invest up to £ 30,000, after which they will have to pay Interactive Investor’s standard costs.

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