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Can wealth managers cash in on the platform price war?

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

‘Suddenly with the RDR people are having to be open with their pricing. Hargreaves Lansdown has come out with its pricing and people are thinking, “Crikey this is costing 45 basis points”,’ Morgan said. ‘If private client wealth managers are charging 1%, the quantum of fee difference is not that great.’

While he suspects that execution-only clients do not necessarily view the service they received as free, he says they are likely to realise that it costs more than they had anticipated, providing a catalyst for some to look to discretionary management as another option.

‘The major criticism that people have of private client services, which is “why pay 1% if I can do it myself?” no longer applies. I welcome this transparency,’ he said.

Change creates opportunities

Jonathan Fry, private wealth director at the eponymous wealth boutique, also believes the change creates opportunities for discretionary managers to pick up business.

‘It does create an opportunity because it dispels the very simple but too widely held myth that discretionary management is expensive and anything via the likes of execution-only platforms was low cost,’ he said.

‘It gives discretionary managers an opportunity to at least state their case on equal terms. Whether or not the investing public will be capable of grasping the facts quickly is another matter.

‘I think it will take a long time to change the mind-set that execution-only is always the cheapest option, but at least DFMs now have advantage of operating on a more level playing field – and one in which all charges are clearly disclosed and therefore direct comparisons can be made.’

Fry anticipates the success of discretionary managers in attracting disillusioned execution-only clients will come down to whether they are able to engage with them in a similar way to the platforms, particularly via marketing.

He notes this is an area that private client firms have traditionally been less active on, and says much will come down to clients’ perceptions of trust, control and cost.

Quilter Cheviot executive director Pamela Reid also hopes the managed portfolio service, which is available to direct clients on its internal platform for an all-in fee of 1%, could ultimately benefit from greater transparency in execution-only platforms.

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