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What does platform price war mean for wealth managers?

by Wealth Manager Team on Feb 17, 2014 at 10:33

What does platform price war mean for wealth managers?

Fears that platforms would negotiate vastly superior pricing deals with fund groups have proven unfounded, with wealth managers still able to maintain a competitive edge.

Hargreaves Lansdown, Skandia, FundsNetwork and Bestinvest have all revealed the average annual management charges (AMC) they have agreed ahead of their new pricing structures coming into force next month. These range from 0.52% to 0.64%.

While discussions on pricing between a number of national wealth managers and fund groups are ongoing, some discretionaries say the terms negotiated by the platforms merely close the gap on their existing pricing.

Jaime Arguello (pictured), head of multi-manager at Barclays Wealth and Investment Management, confirmed the bank’s wealth arm generally receives better rates than its platform, Barclays Stockbrokers.

‘We get very competitive prices for mandates,’ he said. ‘It is probably cheaper than super-clean shares. It is not so much cheaper now, but it is still more favourable,’ he added, in reference to platforms, owing to the fact the firm is allocating ‘several hundred millions’ to funds.

Similarly, Nick Sketch, senior investment director at Investec Wealth & Investment, said the terms negotiated by platforms are ‘consistent with what we would have expected’, adding that they have narrowed the gap.

‘Because of our size, we get access to very cheap units,’ he said. ‘But are they much cheaper than the headline rates announced so far? No, not at all.’

Société Générale Private Banking Hambros CIO Eric Verleyen said he believes the pricing issue is more of an issue for ‘smaller wealth managers’ as his bank is able to benefit from its scale.

Wealth managers across the board insist pricing is not the overriding concern when selecting a fund. Brewin Dolphin head of portfolio strategy Guy Foster added: ‘Our approach has always been to find the best ways of implementing our investment strategy for clients and cost is just one of the factors we look at when making that decision.’

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