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Will Skandia’s free MPS challenge your adviser proposition?

by Danielle Levy on Feb 19, 2014 at 09:40

Will Skandia’s free MPS challenge your adviser proposition?

Skandia’s new free discretionary proposition, which has its low cost WealthSelect fund range at its core, is set to shake up the managed portfolio service (MPS) market.

It has been greeted with scepticism by some industry executives, who say the decision to offer active portfolio management and asset allocation effectively for free could devalue the work involved with existing adviser propositions.

Skandia, led by Paul Feeney (pictured), has a huge reach in the adviser market, with more than £26 billion in assets under administration and 22,000 financial adviser relationships across the UK. Moreover, the new discretionary service has Skandia’s WealthSelect range at its core.

It has an average annual management charge of 0.52% with no additional charge for its managed portfolio service.

Whether discretionary managers want to admit it or not, Skandia’s new free discretionary service will prove a challenge to what is already a competitive and saturated MPS market. Discretionary ‘service light’ propositions for advisers are currently priced from as little as 0.25% to 0.3% before platform charges. And some believe having a major player offer a free discretionary service will provide further downward pressure on fees.

It should be noted the proposition is not whole of market because the underlying WealthSelect fund range comprises 42 funds that are run by Old Mutual Global Investors, with over half of sub-advised by external investment houses, including Aberdeen and BlackRock. John Ventre, Old Mutual’s head of multi-manager, will run the discretionary service, offering different risk profiles that are rebalanced on a monthly basis.

Alistair Campbell, Skandia’s head of investment marketing, expects the MPS launch will put downward fee pressure on competitors, which he views as a positive for the adviser community.

While portfolio management is free, the average platform charge on Skandia is 0.48% and responsibility for suitability falls to the adviser.

Campbell hopes the MPS will appeal to advisers looking for an outsourcing opportunity that does not cost a lot of money and lowers their administrative burden.

‘This was why the solution made sense from the advisers’ perspective. From the clients’ perspective, they are looking for access to funds at an optimum price and they have a portfolio that does not cost them the traditional fees DFMs might charge,’ he said.

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