Aston Lovell launches new interactive trading platform
Fine wine brokers Aston Lovell have launched a new trading platform which allows non trade collector’s access to Liv-Ex, the wine equivalent to the stock exchange.
My initial impressions were that the system is ridiculously simple to use i.e. one button to buy and one to sell.
The client’s portfolio displays not only the best bid from Liv-Ex, but also the current merchant price from Farr Vintners and Bordeaux Index. By clicking on the sell button, an alert will be sent to the office and a member of staff will be in contact about the process and whether the best bid is an anomaly rather than a realistic price.
The Trading Platform, or system for buying, displays a selection of data from Liv-Ex including Best Bid and Best Offer and once again a human response in terms of a phone call to discuss your needs will be generated by clicking the “buy” button.
I have been told that the site does offer more than a simple feed from Liv-Ex, but that the “bells & whistles” occur behind the scenes. One interesting feature is the ability for a client to set comfort parameters, which allow the user to specify a predefined percentage limit of profit or loss. Once this limit is reached a member of staff will be in contact to discuss and presumably offer their opinion on whether the customer should hold or sell.
The cynical amongst you will be questioning why each stage should require a phone call… Hard sell or a lack of sophistication in the system?
I asked Director Bruce Aston these questions and he pointed out that a quick look at wine searcher will throw up the odd anomalous price which could lead to a failure to sell, or an undervalued wine and the same thing does occur on Liv-Ex. As such he feels that the system cannot be entirely automated.
Bruce was very specific concerning the question of hard sell by sales staff attempting to secure financial incentives and I was told that “staff do not receive any commission, or bonus based on sales.”
In fact the majority of my conversation with Bruce was really pursuing the credibility of the company. Not because I have any concerns for Aston Lovell in particular, but because the investment arm and dare I say the industry in general, has been beset by scandals and question marks concerning malpractice, rogue trading and downright fraud.
Clearly the director’s of this company are not blind to these issues, as the Aston Lovell website features a Charter of what they believe to be acceptable practice.
The one glaring omission in this charter is the need for wines to be stored in the clients name and not in a company account which could cause concern over storage fees and even ownership should the company go bust. When I asked Bruce about this I was told that wines were stored at Octavian Vaults and that customer’s funds were also held in individual accounts at Barclays Bank who supply a monthly statement to each client. Both of which were held in the customer’s name, not the company’s.
Aston Lovell does charge an upfront fee of 12.5% and a seller’s fee of 2.5% (6% if selling wines not bought through the company) and upfront fees are often a cause for concern.
Upfront fees are often much higher than the profit margin of the merchant, but this is supposed to include the sellers fee which is obviously at today’s value, not the future value. The theory being that you save by paying now.
The problem with this model is that some companies will go bust either through circumstances, or by design and the wine investor or collector will have paid a higher price upfront with no benefit when it comes to selling.
Obviously Aston Lovell does have over six years of trading history and is therefore not likely to engage in phoenix company activity and there is no cost of selling the wines incurred by the company as they cover the Liv-Ex commission in the 2.5% sales fee.
Nevertheless, I still had to try to get my head around whether paying an upfront commission would prove more expensive than buying from a traditional merchant and would therefore be more costly to the collector. Especially when it came to selling should the worst case scenario of Aston Lovell going into liquidation occur.
The second question that needed answering was whether selling at trade minus 2.5% commission would prove disadvantageous when compared to selling on the broking list of a merchant.
As such I have compared a selection of wines that are available on the lists of both an averagely priced, but well established traditional merchant and Aston Lovell.
100% is the equivalent to the Price that the merchant is either offering to sell the wines for, or the price on the broking list minus the merchant’s commission.
The chart shows that any wines above 100% are more expensive to buy from Aston Lovell and the client would be better off buying through a merchant, whereas the inverse is true when the wines are sold. Any wines sold through on the trading platform that realise more than 100% of the merchant price would obviously offer a better return.
As the Chart shows two wines can be bought for less at Aston Lovell, one for the same price and two would prove to be more expensive. When selling, a merchant would offer a better price for three of the wines. However, in this small and therefore unscientific study, it is interesting to note that any collector buying and selling all of these wines through Aston Lovell would only have been 0.3% worse off when buying and 0.9% worse off when selling.
In summary, I would say that the system is simple to use and offers the customer the information necessary to make decisions. Furthermore, the company is credible as is their business model.
I have to admit that I found the system to be somewhat limited, but I am told that there are enhancements in the pipeline and there is intended to be a great deal of interaction on the telephone, so it will quickly become apparent where future development should occur.
The website makes frequent reference to wine investment and it is my opinion that some collectors who buy and trade to assist in the financing of their collections will be alienated by this. This is a missed opportunity, because Liv-Ex and therefore this platform offer many wines that are more reasonable than the top trophy wines. All the wines are physically inspected by Liv-Ex and are professionally stored at Octavian Vaults and can be withdrawn, delivered and drunk in the usual way.
For me there are two overriding advantages to the Aston Lovell trading platform. The first is the fact that Bordeaux Index and Farr Vintners prices are also displayed which allows the client to buy and sell only the wines that will offer a better return when offered wholesale.
The second benefit is speed. Transaction time is minimal when compared to wines that are added to traditional broking lists which can run into months. In a sliding market this can have an impact on the price achieved even if the collector is considering bringing in wines sourced from elsewhere and paying the 6% commission!
The downside for this business model should it become the template for other companies is that it will turn wine into a much more liquid asset; excuse the pun. As such the market is likely to become more volatile and a riskier place for the uninitiated. Irrespective of this, the truth is that the market is evolving and this is likely to happen anyway. Fine wine investment funds have expanded beyond their traditional European home, with new companies opening in China and the United States. These dedicated wine funds have an obligation to maximise profit and trade wines more aggressively.
Finally, it is my overall feeling that Aston Lovell is probably ideal for the collector confident enough to be promiscuous in terms of who they deal with. After a random look at just five wines it is obvious that the system will reveal opportunities, but it is up to the buyer to exploit that advantage. It may well be through Liv-Ex plus Aston Lovell commission, but equally it may prove to be via traditional merchants.
A link to the Aston Lovell website
Published: 16th October 2012