Sesame, St James’s Place, Openwork and Intrinsic have been named as the four ‘possible winners’ of the rush to ‘superclean’ share classes in the post-Retail Distribution Review world in a new report produced by analysts at Barclays.
The report, published today (3 December), noted the shift from the pre-RDR paradigm wherein the fund manager set pricing and then determined how much of the AMC they retained, as opposed to paying away for distribution and advisory selling of the fund.
It states that now the market is starting to witness a shift in pricing formation towards the advisers and distribution platforms, who are increasingly beginning to control distribution. According to Barclays, advisers and platforms are trying to use their relative closeness to the customer to grab a larger share of the economics.
Post-RDR, Barclays calculated advisers were typically taking 115 basis points and asset managers were getting 75 basis points from clients in a typical advised relationship.
The report comes after FTAdviser sister title Investment Adviser revealed research carried out by International Financial Data Services and CWC Research found asset managers were eschewing deals with platforms in favour of restricted advisers in order to secure “influence” over sales.
Of the four firms, SJP and Openwork are already restricted, while Sesame has announced plans to go fully restricted from next year. Intrinsic still includes IFAs, but since last year it has been investing heavily in bolstering its restricted advice offering.
Two-thirds of asset managers who would consider launching discounted shares were “attracted to restricted propositions” and half would “look for influence over distribution”, the research found.
One fund manager told the researchers his firm would “only offer better terms to distributors who can influence the delivery of funds”, while another said most platforms “cannot influence fund flows so will not be offered discounts”.
The story prompted a storm of debate on Twitter, with Phil Young, managing director of support services firm Threesixty, saying he had been offered cash by a fund manager in return for a “guaranteed panel position” in the past, adding that the practice continues and that payments are often disguised as “a marketing package” to avoid drawing the ire of the regulator.
Mr Young added that some restricted adviser firms had even stopped waiting to be offered an incentive and were effectively drawing up “rate cards”.
Barclays also found there was a desire to not increase total costs to the customer and so advisers may recommend passive funds or funds with lower wholesale fees to increase their proportion of the overall revenue pie.
The report states: “We believe there is evidence, particularly among the life assurers, of trying to move more into distribution to hedge against this threat. Possible examples include L&G buying Cofunds, Standard Life promoting Standard Life wrap and Old Mutual promoting Skandia.”
