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Wealth firms dismiss admin fee model as ‘against RDR spirit'
by Danielle Levy on Oct 25, 2012 at 07:45
A number of wealth managers have questioned Barclays’ mooted plans to charge fund groups administration fees after the retail distribution review (RDR), arguing it is not within the spirit of the regulation.
Last week, Barclays’ wealth and investment division said it was looking at levying administration fees from product providers whose funds it selects for client portfolios. It argued fund groups rather than clients should bear the costs of administering portfolios.
With the RDR set to cause pricing pressure as trail commission is removed, the alternative model could allow firms to use their distribution clout to protect their margin.
However, a number of firms say this is not a model they plan to follow, questioning whether it is justifiable.
Guy McGlashan, head of strategy and development at Kleinwort Benson, said: ‘This is not something that Kleinwort Benson will be doing. The whole purpose of RDR is to come out with a clean and transparent form of pricing for clients. We don’t believe this is in keeping with the spirit of the regulation.’
Likewise, Jonathan Polin, chief executive at Ashcourt Rowan, agreed. ‘We have been more focused on drawing down the annual management charge for the benefit of our clients,’ he said. ‘The move will be from the standard 75 basis points to 50bps, so clients get a cheaper total expense ratio.’
Another managing director from a medium-sized wealth management firm said that large wealth managers should instead focus on using their buying power to drive down charges for the benefit of their clients.
‘The firm is getting a fee for discretionary investment management in the new world post-RDR and that is it. Getting a payment from other fund houses is what was done years ago. Firms are now getting to the tail-end of it, but this seems to be perpetuating this,’ he explained.
However, a senior fund group executive said the model may not represent a sea-change but rather a stop gap, as the industry awaits the final aspects of the platform paper and clarity is provided on how platforms will be defined.
A spokesperson for Barclays said the proposed administrative fee would not relate to product recommendations, adding: ‘Our approach follows the spirit of the RDR, which is around clarity of services and charges for those services.’
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