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Can wealth managers cash in on the platform price war?

by James Phillipps on Feb 05, 2014 at 11:22

Can wealth managers cash in on the platform price war?

The new unbundled charging structures from Hargreaves Lansdown, Fidelity and Barclays Stockbrokers have caught the attention of most in the advisory and wealth management sectors.

From March, the UK’s largest fund supermarkets and direct-to-consumer platforms will switch to a clean platform fee. It is a move some believe could present a golden opportunity for discretionary investment managers to attract business from wealthy execution-only clients looking to have their money managed by a professional.

With downward fee pressure on discretionary fees over the past few years – particularly on more standardised offerings like managed portfolio services where competition is rife – the price differential between discretionary and DIY appears to be narrowing.

Leading the way

Hargreaves led the way with its new pricing structure, ahead of new platform rules coming in in April. The UK’s largest consumer platform will charge 0.45% for portfolios under £250,000, 0.25% from this level up to £1 million, 0.1% up to £2 million, with no charge levied thereafter.

However, a look at the finer print reveals 73 separate lines of different charges, including fees for paper valuations and higher exit charges from June.

The company also backed down from introducing a new additional charge of 0.45% for customers holding investment trusts on its platform after an outcry led by the Association of Investment Companies (AIC) and private investors.

The news comes as Fidelity reveals lower headline charges for its platform.

Investors with up to £250,000 will pay a 0.35% service fee, falling to 0.2% between £250,000 and £1 million, with no service fees thereafter. Fidelity said there would be no initial, switching or exit fees and no extra fees for product wrappers or for having a preference for using the phone or receiving paper valuations.

Barclays Stockbrokers also joined the fray this week, setting its fund administration fee at 0.35% per annum, with no further charge on fund holdings over £500,000.

The unveiling of these structures has been welcomed by Harry Morgan of Thomas Miller Investment, who says the headline 1% management fee that dominates private client investment management now looks less expensive.

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