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Chris Macdonald: fund charges will fall by at least 10%
by Danielle Levy on Sep 24, 2013 at 14:00
Brooks Macdonald chief executive Chris Macdonald believes fund charges could fall by 10% in six months’ time, as margin squeeze in the industry continues apace.
Speaking in the wake of Brooks’ full year results to the end of June, in which the group posted a 22% rise in pre-tax profits to £10.4 million, Macdonald (pictured) said he is pleased with progress made over the past year but is keeping a keen eye on oncoming regulation.
Following the introduction of the retail distribution review (RDR) and its focus on transparency, he said the non-bespoke areas of Brooks Macdonald, particularly its managed portfolio service (MPS), had come under pressure. With new platform rules coming in next year, he expects fund groups will come under the same pressure - if not more.
‘Our MPS is around £400 million of £5.1 billion, which is under 10% of our funds under management, which clearly has an impact. We have seen margin pressure on products and I think we are going to see this trend roll out to the fund management groups. There is no question there will be margin squeeze on products, while services remain pretty robust,’ he explained.
As a result, the firm has dropped the charge on its managed portfolio service to 0.75%, versus 1.25% three years ago, and has done so for legacy and new business. Macdonald says this compares to some competitors who appear to be running two pricing structures.
‘Under treating customers fairly I think it is inappropriate to have two pricing structures behind the same product,’ he added.
Although the firm’s funds business will come under the same pressure, Macdonald said that as a significant fund buyer lower charges will ultimately benefit its client base. ‘I would be surprised if funds are not at least 10% cheaper in six months,’ he added.
He also highlights auto-enrolment as a significant growth opportunity, which they are seeking to capitalise on by installing the group’s own multi-asset fund range as part of a master trust proposition that will launch in October. He says the opportunity is comparable to that of Sipps, which the firm identified in 1995.
‘We want to be early in the auto-enrolment story, as we think it is better to get in early rather than late,’ he explained.
Having posted a 45% rise in assets to £5.1 billion, buoyed by the integration of Spearpoint, Macdonald is bullish on new offshore business Brooks Macdonald International.
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