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View the article online at http://citywire.co.uk/wealth-manager/article/a727903

Rathbones to cut buy list if Hargreaves pricing not offered

by Eleanor Lawrie on Jan 14, 2014 at 14:23

Rathbones to cut buy list if Hargreaves pricing not offered

Rathbones' head of fund research David Coombs has contacted fund groups informing them that if his firm is not offered the same prices as Hargreaves Lansdown they could risk falling off recommended lists.

As Hargreaves Lansdown prepares to unveil its new pricing structure and give more detail on its new Wealth 150 and core funds list, Coombs (pictured) said his company expected to access funds at the same price level as Hargreaves. If Rathbones is offered a worse deal, the funds could be removed from the company's internal buy list, Coombs warned. Rathbones currently allocates £8.5 billion to collectives.

‘We have already informed the asset management companies in writing that as far as we are concerned we do not want to be put at a competitive disadvantage,' Coombs explained.

'With Hargreaves, Standard Life or any other large institutions, it is really important these are input prices to our process and we would expect exactly the same deal.

‘In fact, any fund that is on that list where we are offered a worse deal will not be on our recommended list.’

On Wednesday Hargreaves Lansdown will unveil its new pricing structure following new platform rules that come into action in April which form part of the retail distribution review and will no longer allow platforms to take payments from providers on new business.

Hargreaves noted in its tender to fund management groups back in May that funds on the new core list would receive ‘preferential, ongoing and intensive distribution across all our available media’. Features include email marketing, more likely inclusion in model portfolios, and a premium position on the Wealth 150 website. 

Hargreaves also pushed fund groups to offer it exclusive clean share classes in the tender and said it did not expect better pricing to be offered to others in the market, given its distribution, viewing ‘better prices as the “new discount”’ in a commission-free world'. At the time the direct-to-consumer platform said it also planned to only offer ‘substantial promotional coverage’ to funds that make it onto its New Wealth 150 and concentrated core list.

4 comments so far. Why not have your say?

Bert Poppins

Jan 14, 2014 at 14:38

So you have less than half the assets under management, a much smaller distribution audience and will make an arbitrary decision simply on the basis that you don't get the same deals. I think it will not only be the funds that are removed from the recommended list. I would have guessed that Rathbones value above HL was its face-to-face service but this mustn't be worth a few bps after all!

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r rodney

Jan 14, 2014 at 14:50

Hey now....this is the big old business world at play and that's the way it is. If Hargreaves are bigger or think they are bigger and have the attitude to fight their corner then let them win. Its up to us the consumers to choose our service provider and I for one will use Hargreaves if they continue to provide and improve. Competition is good.

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independent IM

Jan 14, 2014 at 18:54

The question should be asked about the integrity of including charges/costs within the selection process for inclusion on the Hargreaves Wealth 150. Whilst one should attempt to minimise the cost to clients, it should not be a key criterion for the selection of an active managed fund. Following its introduction, the Wealth 150 should be considered a list of the best cheap (large) funds and not a list of the best funds across the whole market.

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Robin Kent

Jan 14, 2014 at 21:27

All the large distributors are demanding "Most Favoured Nation" on rebates to ensure a level playing field now there is transparency and the benefit is passed to the client.

Charges must be part of the fund assessment process but it is difficult to see how clients' interests are being treated fairly if a firm deliberately deselects strong managers it favors simply because their investors must pay a few basis points more than a rival's.

It is also difficult to see why customers of smaller firms should pay a higher price given that the underlying rationale for collectives is to allow smaller investors to hold diversified portfolios with costs shared by all holders.

Rebates are a legacy of the way the asset management industry covertly funds the distributors and should be banned.

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