Listed IFA firm Frenkel Topping has benefitted from a stronger negotiating position and competition among outsourced investment providers to take a 25 per cent increase in the fee it received pre-Retail Distribution Review, while still substantially reducing the TER paid by clients.
Admitting that his firm was not “charging enough for the service we were delivering”, Richard Fraser, chief executive at the firm, said prior to the rule changes it was forced to take the smallest share of the total cost to investors.
In an interview with FTAdviser, Mr Fraser said the change in dynamic brought about by the RDR had allowed it to take a 25 per cent higher fee while reducing the TER charged to clients from “anything up to 2.25 per cent” to a maximum of 1.5 per cent.
This, he said, is largely due to the IFA firm negotiating a lower rate with discretionary fund managers providing investment management services.
Mr Fraser said: “We receive a larger fee [in the post RDR world]. My view on this is that ultimately as the IFA we prospect for our clients, we maintain the relationship with the client, we have all the compliance risk of that client through risk profiling, capital loss and making sure we get the client the right investment products.
“Yet historically we got paid the least out of it; the institutions or the fund managers have taken a bigger cut of what is available. We weren’t charging enough for the service we were delivering.
“So what we have seen post-RDR is we’ve been able to reduce down the amount of fee that the discretionary manager is taking because they’ve got a fixed fee. If I put a £1m into a DFM they are not having to take on a new fund manager but whatever they earn goes straight to their bottom line.”
Last month, Frenkel Topping announced that it has seen operational profit before compensation and provisions jump 25 per cent in 2012 to £1.1m, as it praised its “early adoption” of the RDR requirements for generating “additional opportunities”
To read the full interview with Mr Fraser, click here.
