Standard Life has expelled one of the UK’s biggest investment houses from its inner circle of partner firms, after they failed to reach a deal on fund charges.
The Edinburgh-based firm, which operates the Standard Life Wrap and FundZone platforms, has cut M&G Investments from its so-called ‘G12’ list of preferred fund providers.
Membership of the G12 alliance means fund providers can be assured of preferential marketing by Standard Life’s platforms, but in return they have to make commitments such as participating in adviser seminars and offering exclusive pricing deals.
But City-based M&G was shown the G12 door last week after it refused to launch ‘super-clean’ share classes on its funds in order to offer exclusive cheap investment charges to Standard Life’s clients.
M&G has become the latest fund group this year to be removed from the list after Henderson pulled out of negotiations with the platform about discounted share classes, having initially agreed to work with Standard Life in 2013.
Other fund houses have also been asserting themselves in what amounts to a pricing war between providers and distributors, which stems from the renewed focus on costs that emerged from the RDR regulatory clampdown.
Liontrust chief executive John Ions in September said he was refusing to change his business model after Hargreaves Lansdown removed one of the group’s products from its preferred funds list due to “high fees”.
Standard Life had made its securing of preferential share classes a cornerstone of its post-RDR platform strategy but the refusal from two of the UK’s largest asset managers has put a dent in its hopes.
Some fund groups launched specific share classes at the request of Standard Life, the rates of which reflected rebate agreements that existed between the platform and the fund groups prior to the introduction of the RDR in 2013.
In March this year, Standard Life announced it had received preferential deals on 290 funds from 13 fund groups.
M&G was listed among those groups but it has since emerged the preferential deal with M&G was only on “unbundled insured funds”, which were only available through investment bonds or Sipps, and not conventional retail funds.
Both M&G and Standard Life declined to comment.
Price v quality – difficult balancing act
Standard Life is not the only platform focused on offering enhanced marketing to fund managers that offer exclusive pricing deals to its clients.
Last year, Fidelity announced its Access programme, which it said would grant fund managers “significant benefits”, including greater access to Fidelity staff and “an enhanced programme of marketing and events”.
But it seems some groups have decided not to go down the route of cutting their prices at platforms’ behest.
Lawrence Cook, director of marketing and business development at discretionary manager Thesis Asset Management, said Standard Life would have “certainly want[ed] to drive a hard bargain” that was “arguably good for consumers”.
But, he added, “for fund managers it is a challenge to balance the demand from the sales and marketing divisions for lower charges with the financial pressures of supporting a quality investment solution”.
That said, “it is no good saying you can deliver X but cut your revenue to such an extent it hampers your delivery of a quality product/service,” Mr Cook said.
Asked if it was a blow for M&G to be removed from the list, he said: “If you are the sales director, then probably yes. If you are the finance director, then you might think I can get better margins elsewhere.”
