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View the article online at http://citywire.co.uk/wealth-manager/article/a728267

Why Hargreaves Lansdown rejected 0.2%

by Danielle Levy on Jan 15, 2014 at 12:59

‘It is up to the fund manager to decide what they want to charge. We have said put forward your best foot.’

Gorham said Hargreaves' decision to pressure fund groups to offer the best prices was no different to how supermarkets negotiate deals for their customers.

'They say to suppliers, you have got the product, we have a massive shop window and we think our clients should get a better deal. The suppliers then decide what they want to do. That is exactly same way we like to treat it.'

When asked if the direct-to-consumer platform is concerned about the potential impact of discounted prices on the margins of the asset management companies, Dampier said prices of active funds could go even lower.

‘I think active managers could drive down their costs more. There are huge costs. If you looked into asset management companies you see a sales director, a marketing director, someone who makes the tea. That is incredible. There are layers upon layers of management,' he said.

'I shouldn’t really say it as I will upset some of my colleagues and friends, but they are definitely top heavy in my view. There could be quite a lot of change and don’t even move me on to the salaries as you well know. And I am not talking about fund manager salaries either.'

Gorham, meanwhile, expects asset management companies will look to overcome a potential hit to their margins by increasing volume.

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3 comments so far. Why not have your say?

astute investor

Jan 15, 2014 at 13:49

Mark Dampier is so right regarding heavy costs and general inefficiency of an asset management business . HL should be applauded for applying pressure on fees and acting as a collective bargaining tool for the retail investor.

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george williams

Jan 15, 2014 at 14:16

I disagree with "astute investor" - the race to the bottom on fees means that there will likely be fewer new fund entrants as the assets required to break even will be unattainable within a sensible time period. If you kill off innovation and new entrants you end up with a monopolised business - the consumer then suffers. Why couldn't the clever Mr Dampier apply some sensible pricing ideas to get costs down. I have always thought that a fund with assets over a billion charging even 50 bps seemed high - can it really cost £5 million to run a long only equity fund. Couldn't with his and others buying power have suggested as an example a reduction in the ter to 25 - 50bps for all funds over 1 billion with performance fees for delivering superior returns.

this wouldn't kill off innovation, would reward consumers and befit managers who were successful....

a missed opportunity again - usual names, usual suspects, shame

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ScepticEclectic

Jan 15, 2014 at 17:30

"Methinks Mr. Dampier doth protest too much".

The impartiality of Mark's research is forever compromised.

The tender doc to asset managers was explicit in stating two principles

• Inclusion in the Wealth 150+ is dynamic – you come and go as your performance varies - sounds fair, right?

• BUT pricing is either static or one-directional – you have no capacity to vary pricing according to membership of the Wealth 150+, to business volumes or installed AUM

So you commit to the price/volume combo which is what the ear-bending was all about, discover that you are bounced out of the Wealth 150+ and are stuck with the price.

It is very telling that there are only 27 funds on which 100+ managers with 2000 funds have agreed to drop their trousers. This isn't the cream of the crop - it's the sub-scale "any flows are better than none" funds that can't gather assets for one reason or another.

Why wait until the end of March to reveal the names unless they were also-rans?

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