Frequently asked questions
Commercial
How does Nucleus charge for the service?
Are there any annual or other ongoing administration fees?
How is trail commission paid to the IFA?
What interest rate is paid on cash deposits?
Functionality
How many funds are available on the Nucleus wrap?
Can new funds be added?
Are the funds subject to both initial and annual charges?
Can securities be bought and sold?
What tax wrappers are available on the Nucleus wrap?
Can regular withdrawals be set up from an account?
Can a preferred existing Sipp provider continue to be used on the Nucleus wrap?
Are there any additional set-up, annual or other transaction charges for the Nucleus Pension account?
Is there a full online transaction history for each account?
What support can Nucleus provide to transfer assets from other platforms?
What is Nucleus’ position on automatic re-registrations and in-specie transfers?
Can a client’s collective investment portfolio be re-registered into an Isa without encashing the units?
For investment bonds taken out in the name of trustees, does Nucleus have the facility to assign certain segments into the name of a beneficiary?
Corporate
Who owns Nucleus?
How is the value of a firm’s equity stake in Nucleus calculated, and how does a firm show this on their company’s balance sheet?
In order to participate in Nucleus does a shareholder firm have to guarantee
to place a certain level of business on the platform, and are there penalties for not achieving this?
If a shareholder firm operates a structure with clients through a group of companies, including appointed representatives, how will this work?
What is the company’s long-term strategy and exit plan?
If a firm owns an equity stake in Nucleus does this not lead to a potential conflict of interest with clients?
Can the Nucleus wrap be accessed without a firm becoming an equity participant?
What is the process for ‘signing up’ to Nucleus?
What insurance does Nucleus have in place in the event of negligence or fraud?
What safeguards are there in relation to assets on the Nucleus platform?
Commercial
How does Nucleus charge for the service.
There are no charges for opening or closing accounts, for opening or closing your Nucleus wrap or for making payments into your Nucleus wrap. The annual wrap charge is tiered and has the following tiers and rates:
Client holding annual wrap charge that applies to each tier of the client holding
Up to £1m 0.35%
£1m to £2m 0.30%
£2m to £3m 0.25%
£3m to £5m 0.20%
More than £5m 0.15%
The lowest tier charge of 0.35 per cent is accrued daily on the whole portfolio and debited from cash each month. Any rebate associated with larger portfolios will be calculated quarterly and credited to your accounts on a pro-rata basis. The Nucleus Offshore Bond account is subject to an initial wrap charge of £100 and an additional annual wrap charge of 0.15 per cent per annum while the Nucleus Onshore Bond account is subject to an additional annual wrap charge of 0.10 per cent per annum. Initial commission is calculated as a percentage of the payment value and is deducted when the payment is allocated to the account. Trail commission is expressed as a percentage and is accrued daily and debited from cash each month.
Are there any annual or other ongoing administration fees?
No, there are no additional annual or ongoing administration fees for using
the Nucleus wrap.
How is trail commission paid to the IFA?
Unlike the traditional concept of trail commission being paid from
product costs, the transparency of the Nucleus model requires that trail commission
is paid from the cash held in a client’s portfolio.
The total charge to a client consists of three elements:
the Nucleus wrap charge;
the cost of the assets that the adviser and the client choose to invest in;
and
the cost of financial advice, agreed in advance between the adviser and the
client.
As well as providing total transparency, this approach also gives IFAs and
their clients complete freedom to determine the remuneration structure.
What interest rate is paid on cash deposits?
Interest is paid on all cash deposits. The current rate of interest is the Bank of England base rate plus 0.75 per cent.
Functionality
How many funds are available on the Nucleus wrap?
Nucleus is ‘whole of market’ in terms of asset choice and, provided assets are suitable and pass due diligence, there are no constraints on asset availability.
We have negotiated rebates to normal initial and annual management charges with over 120 asset management groups, representing around 2,200 funds. The complete fund listing can be provided to IFAs as part of the due diligence process, subject to signing an appropriate confidentiality agreement.
Can new funds be added?
Yes, subject to the suitability of assets and the due diligence process,
new funds will be added once we have established commercial terms and appropriate
operational processes.
Are the funds subject to both initial and annual charges?
Clients have access to most funds at nil initial charge. Where this
is not the case, the initial charge is significantly discounted from the standard
charge.
Although all funds carry an annual management charge (AMC), any fund rebates (typically 50 per cent of the AMC for retail funds) negotiated by Nucleus are credited directly back to the client’s account.
Can securities be bought and sold?
Yes, direct equities, exchange traded funds, investment trusts and other securities such as gilts and corporate bonds can all be dealt through the platform. The cost for investments traded through a stockbroker there is a charge of 0.15% of the value of the trade subject to a minimum of £15. This charge is split proportionately across all clients dealing in the asset at the same time.
What tax wrappers are available on the Nucleus wrap?
Clients currently have access to six tax wrappers that are referred to as ‘accounts’. These are as follows:
- a general account for directly-held assets,
- an Isa account
- a Pension account (a trust-based Sipp)
- a Protected Rights Pension (PR) account
- an Offshore Bond account, and
- an Onshore Bond account
Can regular withdrawals be set up from an account?
Yes, regular withdrawals to a client can be automated via direct credit,
subject to adequate cash being available in the relevant account. This can
be paid as a fixed amount, a fixed percentage or the ‘natural’ income stream
generated from a portfolio.
The terms and conditions of the service require the cash account to hold at least six months’ payments (which attracts interest at the normal Nucleus rate).
Can a preferred existing Sipp provider continue to be used on the
Nucleus wrap?
Subject to the agreement of the existing trustees, it is possible
for an existing Sipp to make an investment through the platform by opening
a Nucleus General account held in the existing trustees’ name. In this instance
Nucleus’ client is the Sipp company. That said, Nucleus does not generally
offer a range of different Sipp providers’ wrappers.
Are there any additional set-up, annual or other transaction charges
for the Nucleus Pension account?
No, there are no additional costs other than the standard Nucleus
charges. This is equally true for accounts in drawdown.
Is there a full online transaction history for each account?
Yes, through the online system a full audit trail of transactions
on a client account can be viewed at any time.
What support can Nucleus provide to transfer assets from other platforms?
The Nucleus client relations team takes primary responsibility for
liaising with ceding schemes to pursue transfer and re-registrations, although
in some cases Nucleus may escalate the matter back to the IFA firm if we are
having difficulty gaining a response.
In addition, the IFA account management team works closely with all participating firms to develop asset migration plans and to support their execution. In some cases, this can involve the team working in the IFA firms’ offices to assist preparation of the necessary paperwork as clients move to Nucleus.
What is Nucleus’ position on automatic re-registrations and in-specie
transfers?
Nucleus will always permit re-registration away from the wrap, but
in terms of moving assets onto the Nucleus wrap, the reality is generally driven
by a ceding manager’s own position. For example, for a life company pension
or bond, the assets belong to the life company and have to be transferred as
cash. Assets in a trust-based Sipp in theory can come across 'in-specie' while
Isa, Pep and directly-held assets may be moved in-specie or in cash.
Nucleus is in discussion with various market participants with a view to automating this process as much as possible.
Can a client’s collective investment portfolio be re-registered into
an Isa without encashing the units?
No. The reason for this concerns Inland Revenue restrictions on moving
existing equities (or funds) into an Isa and not specifically due to any technical
limitations of the Nucleus wrap. Assets would, therefore, have to be moved
in as cash in this case.
For investment bonds taken out in the name of trustees, does Nucleus
have the facility to assign certain segments into the name of a beneficiary?
Yes, the policies associated with the Nucleus Onshore and Offshore
Bond accounts are segmented, can take trustee applications and be assigned.
Corporate
Who owns Nucleus?
Nucleus is 49 per cent owned by the management team and the company’s
institutional backer Sanlam, a South African financial services group.
The remaining 51 per cent of Nucleus is owned by the participating IFA firms and this is structured in such a way that all new IFA firms joining Nucleus subscribe for equity, participate in the development of the service and share in the future success of the business.
The amount a firm pays to subscribe for its equity is derived from the quantum of assets it anticipates it can bring and when it seeks to join. Subscription levels are anticipated to rise over time, to reflect both the growing value of the company and the gradual reduction in risk associated with any investment as Nucleus moves more closely into being a profitable proposition.
How is the value of a firm’s equity stake in Nucleus calculated, and
how does a firm show this on their company’s balance sheet?
A typical firm will subscribe for 250,000 ordinary shares in Nucleus
IFA Company Limited (NIFAC), which itself owns 44 per cent of Nucleus Financial
Group. At a point of 'exit' or change of control (when Nucleus is sold
or floated) participating firms shareholdings will effectively convert to shares
in the group company in direct proportion to the volume of revenue which that
firm has generated. The precise mechanism is complex and IFA firms should ensure
they have a full appreciation of the NFG Subscription & Shareholder Agreement
(and associated documentation) prior to subscribing for shares.
The overall effect is that firms are incentivised to join Nucleus early in order to minimise subscription cost and to place assets on the platform (and keep them there) to maximise the opportunity to develop its share of NIFAC.
The equity subscription is made corporately and therefore the shares become assets of your company. Some firms have written off this cost and have chosen to consider the cost as a 'joining fee'. Likewise, some firms have decided to ring fence equity for the benefit of non-shareholders, such as advisers or in some cases, clients.
In order to participate in Nucleus does a shareholder firm have to
guarantee to place a certain level of business on the platform, and are there
penalties for not achieving this?
There is no obligation for any non-founder firm to commit to delivering
a certain volume of assets to the platform nor are there penalties for non-delivery.
However, our business model anticipates that participating firms will be able
to deliver at least of £25m to the platform over two years as a combination
of existing client assets and new money. This minimum level justifies the cost
of supplying appropriate |FA account manager resource to support your efforts.
If a shareholder firm operates a structure with clients through a
group of companies, including appointed representatives, how will this work?
We have participants that operate in a similar fashion, where the
group company subscribes for equity and all calculations sit at this level.
What is the company’s long-term strategy and exit plan?
The main focus at present is on signing-up IFA firms and growing assets
on the platform. Given the ownership model, the form and timing of any exit
strategy is likely to be driven by participating IFAs.
If a firm owns an equity stake in Nucleus does this not lead to a
potential conflict of interest with clients?
The FSA has highlighted the potential for conflict and the need for
IFAs to be mindful of such issues in the context of any individual advice they
might give to a client, as well as their wider TCF obligations. Clearly, any
advice to a client ought to consider the wider context, including the service
and its cost. IFA participation in Nucleus group companies is fully disclosed
in all Nucleus pre and post sale disclosure documentation.
Can the Nucleus wrap be accessed without a firm becoming an equity
participant?
No, the Nucleus business model is firmly built on the principle of
IFA ownership and control. Consequently, we are seeking to develop relationships
with those firms who share our vision and are prepared to make the commitment
to take control and build real value in their businesses. Our direct support
resources are therefore fully focused on supporting these member firms.
What is the process for ‘signing up’ to Nucleus?
The key steps in joining Nucleus are:
- a mutual due diligence exercise by both parties;
- IFA approved by the Nucleus acceptance committee, which acts on behalf of existing IFAs and other shareholders;
- IFA signs terms of business and is provided with platform access permissions; and
- IFA is incorporated in Nucleus shareholder agreement and pays agreed subscription for equity.
- To facilitate the above and to protect the confidentiality of both parties the initial step in the process will be to sign a non-disclosure agreement. Thereafter, the IFA firm will be required to supply information (both financial and regarding your approach to client advice) in order to prepare an application to the Nucleus acceptance committee. In parallel with this the IFA firm will receive full details of the Nucleus Subscription & Shareholder Agreement and associated documentation for consideration.
What insurance does Nucleus have in place in the event of negligence
or fraud?
Nucleus has £1.25m of PI cover in place. This figure was derived after
consultation with the FSA. Our third-party administration partner, Scottish
Friendly, also has significant cover in place for its activities.
What safeguards are there in relation to assets on the Nucleus platform?
All assets in the general account are treated as client money and,
consistent with the FSA’s client money rules, are held in totally separate
client accounts and investments. As you would expect the FSA rules require
these assets to be maintained totally separately from the company assets and
as such are unaffected by the financial position of Nucleus Financial Services.
Current regulations require that the APP, Onshore bond and Offshore bond accounts of the Nucleus wrap must be provided by an insurance company, accordingly we have partnered with Scottish Friendly Assurance (in respect of the APP and Onshore bond) and Scottish Life International (in respect of the Offshore bond) to provide these elements of the service.
Especially stringent regulations apply to the operation of insurers in particular in relation to how assets are held and the minimum financial strength which these companies must demonstrate on an ongoing basis. Scottish Friendly Assurance Limited is regulated and authorised by the FSA while Scottish Life International is regulated by the Isle of Man Government Insurance and Pensions Authority and is wholly owned by the Royal London Group.
Finally, any company shares or other ‘certificated’ client assets are held by a professional independent custodian, Stocktrade.