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Towry's Wilson: give us Hargreaves' terms or we may sell

by Danielle Levy on Feb 28, 2014 at 08:19

Towry's Wilson: give us Hargreaves' terms or we may sell

Towry's head of investment Andrew Wilson says he will consider redeeming when he has an alternative lined up if he does not receive equivalent or cheaper terms for funds on Hargreaves Lansdown's core Wealth 150 + list.

With around £5 billion invested in funds, Wilson (pictured) said he hopes to see fund groups valuing the long-term relationships that Towry tends to build with asset managers and not sacrifice these for short-term volume.

As the industry awaits to see which fund groups have offered competitive pricing to make it onto Hargreaves' core list on 1 March, Wilson said his firm has already redeemed a significant holding in a fund on the Wealth 150 after finding out the fund group had offered better terms to Hargreaves and would not match them. The proceeds were recycled into the group's 'best ideas' funds, where it had negotiated extra capacity with the managers prior to them closing.

The direct-to-consumer platform has negotiated an average AMC of 0.65% on its Wealth 150 and  0.54% on its soon-to-be revealed 150 plus list.

He said redemptions would be made for a 'mosaic of reasons' but one of the most significant would be because of concerns about the alignment of interest between the fund group, Towry and its underlying clients.

'We would expect to have market-leading terms and expect people would want to have a good partnership with us, as we are long-term investors,' he said.

He added that Towry is also growing its assets under management and develops a deep understanding of how fund managers run money.

Towry is at an advantage in comparison to other private client investment firms when it comes to fund pricing negotiations as it invests through funds of funds and can therefore receive discounts through rebates.

In contrast, competitor discretionary managers now face the challenge of negotiating access to super clean discounted share classes where annual management charges (AMCs) will be disclosed.

While Fidelity announced an average AMC of 0.64% on its Select list, Wilson was encouraged to see that the platform is not getting cheaper terms than Towry.

9 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Feb 28, 2014 at 08:28

How does the HL anouncement affect Towry's buy decision - if the fund was a good recommendation for their clients before, then it still is. Creating trading costs for clients (it always costs to switch funds given the single swinging price mechanism) to exert pressure on fund managers is not appropriate and Towry's customers have cause to be concerned.

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Feb 28, 2014 at 09:15

So Towry sold a fund that had been bought presumably for good reasons purely because he was annoyed at not getting the same terms as HL. I'm sure Towry's clients will be delighted to know that their investment decisions are made for all the right reasons. If I were one of their clients, I think I would offer them the same ultimatum - either you make investment decisions for investment reasons or I will sell.

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Feb 28, 2014 at 09:29

It's a shame Towry don't adopt the same view on their own fees. A recent cost comparison table I saw showed Towry's model investment portfolio to be one of the most expensive in the industry. Maybe clients should give Towry the same ultimatum.

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Feb 28, 2014 at 09:32

I think if i was a client of their I would be happy they were exerting this pressure and not just accepting the big boys should get better terms.

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Feb 28, 2014 at 11:48

Gosh, so much testosterone brimming over!

I share the view above that questions should be asked of any firm that incurs costs for clients just because they're feeling peeved.

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jeffrey williams

Feb 28, 2014 at 11:51

This is the kind of attitude that gives the industry a bad name and shows how difficult it is to find true and professional investment management if you are a private client

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Feb 28, 2014 at 14:07

Fund managers determine their most profitable pricing strategies given the perceived power of the distributor, and price accordingly. HL has £30bn which it does not directly control, but 'guides' on (and there's the next debate). Towry's discretionary pot is significantly less at around £5bn. Wealth 150 is actually more like Wealth 80-odd, and the prices are not significantly different to pre-RDR net-of-rebate costs; however some smaller distributors never bothered negotiating rebates, mainly because they couldn't handle them. Now the cosy price cartel is broken via share classes, the miffed managers are beating their collective chests in protest.

However, threatening (and carrying out) withdrawing their support of a fund manager is a perfectly acceptable tactic for a DFM - that's what discretionary status allows, even in a fit of pique, and that's what you risk if you elect to use a DFM. It is a fact that a major criterion affecting variability of portfolio performance is the cost of ownership. It is hardly surprising that a performance-proud manager is going to challenge prices - however likely unsuccessful.

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Andrew Bedford

Feb 28, 2014 at 16:43

Thanks for the comments and insight graham, it is a fascinating read. And as you say - "guides on " will be an interesting debate in the Execution Only/ D2C space. Probably OK if factual only but when does that trickle into advice?

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Ian Lees

Mar 01, 2014 at 08:39

We tied to invest in Fidelity - and their story. . .and were prevented when Standard Life refused to accept the clients - for new business or increments ? Clean funds or just undermining clients by Standard Life and American investment house - Fidelity ? The FCA is not concerned - and does nto intervine . . . .

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