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Discretionary fees under the spotlight: how do yours compare?

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Discretionary fees under the spotlight: how do yours compare?

Research by Numis has revealed the divergence in pricing between some of the country’s leading discretionary managers.

The average total cost imposed by the three firms – Brewin Dolphin, Investec Wealth & Investment, and Rathbones – is 1.31% per year for clients with a £500,000 portfolio.

According to the modelling, Rathbones came out as the cheapest house with a 1.12% total cost for its fee-only proposition, while Investec was the most expensive at 1.42%.

The calculations are based on a portfolio of £500,000, and factor in 24 transactions involving funds or listed securities each year. They exclude VAT and the fees paid to the underlying fund managers.

The findings are:

Rathbones Discretionary (fee only)
Account fixed charge £100
Charge on first £1 million 1.00% £5,000
Transaction charge £20 £480
TOTAL £5,580
1.12%

Brewin Dolphin Discretionary (fee only)
Charge on first £1 million 1.30% £6,500
Transaction charge £20 £480
TOTAL £6,980
1.40%

Investec Portfolio Management Service
Charge on first £1 million 1.25% £6,250
Transaction charge £35 £840
TOTAL £7,090
1.42%

When the portfolio size is increased to £1.5 million, the rankings remain the same:

Rathbones Discretionary (fee only)
Account fixed charge £100
Charge on first £1 million 1.00% £10,000
Charge on next £500,000 0.50% £2,500
Transaction charge £20 £480
TOTAL £12,980
0.87%

Brewin Dolphin Discretionary (fee only)
Charge on first £1 million 1.30% £13,000
Charge on next £1 million 0.90% £4,500
Transaction charge £20 £480
TOTAL £17,980
1.20%

Investec Portfolio Management Service
Charge on first £1 million 1.25% £12,500
Charge on next £1.5 million 1.00% £5,000
Transaction charge £35 £840
TOTAL £18,340
1.22%

Brewin Dolphin, Investec Wealth & Investment, and Rathbones are among the few wealth managers to publish unified rate cards publicly.

Killik does so too, although comparisons are less clear because its transaction charges are based on a 1% dealing commission structure (with a £40 minimum) rather than a flat fee.

However, Hargreaves Lansdown’s portfolio management service stands to undercut the current market, with total costs of 0.35% on £500,000 portfolios and 0.23% on those of £1.5 million.

Hargreaves Lansdown Portfolio Management Service
£500,000 portfolio £1.5 million portfolio
Charge on first £250,000 0.45% £1,125 £1,125
Charge on next £750,000 0.25% £625 £1,875
Charge on next £1 million 0.10% £500
Transaction charge None
TOTAL £1,750 £3,500
0.35% 0.23%

There are several important caveats to all this, of course. The full cost to the end investor will be influenced too by the fund prices negotiated by the wealth manager, as well as by allocations to cheaper passive products.

The costs will also be shaped by the degree to which the wealth manager turns over the portfolio.

And perhaps most importantly, the research takes no account of the performance delivered for the client, or the overall value of the service to the client – including ease of use, communication and so on.

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