Trail removal ‘will hit Brewin Dolphin hardest’ post-RDR

Brewin Dolphin will face the biggest hit in the private client sector when the introduction of the retail distribution review (RDR) comes in and removes trail commission revenue.

Stuart Duncan, a financials analyst at Peel Hunt, said the phasing out of trail will see Brewin Dolphin lose £28 million in revenue over the next couple of years.

However, rather than hurting the firm, Duncan believes in the short-term Brewins is likely to benefit from its new direct charging structure.

‘In effect the new fee charge will be implemented this year although they will still collect the trail,’ said Duncan. ‘In effect, in the short term, there will be an element of double counting until the trail reduces.’

Brewin, headed by Jamie Matheson (pictured), was unable to comment, being in a close period, but while it admits the loss of trail will have an impact on revenues, it disputes the £28 million figure.

In terms of other private client firms, Duncan said the impact of trail commission removal on, for example, Rathbones and Brooks Macdonald, will be ‘relatively insignificant’.

‘The difference with Rathbones is they always had a choice to buy institutional units – and they’ve never received trail commission,’ said Duncan.

‘With Brooks Macdonald – there’s a very small amount they get trail commission on,’ he added. ‘The acquisition they have just made, Spearpoint, includes trail commission of £8,000. Younger businesses like Brooks Macdonald are less reliant on trail.’

Price transparency

However, aside from the financial impact, Duncan emphasised the new level of price transparency will be enhanced and will render the firms’ propositions even more attractive.

‘Price transparency makes the service they offer more attractive to private clients, especially versus independent advisers,’ said Duncan. ‘For example, you have a personalised service and pay 1%, but for an IFA, you can end up paying 2%-3%.’