Major discretionary managers unveil new pricing standard

Quilter Cheviot and Rathbone Investment Management have revealed the details of their new discretionary management transparent pricing comparison model.

The total account cost (TAC) aims to provide a framework for all discretionary fund managers (DFMs) to communicate the total costs for end clients in a standardised way.

Rather than just a single end figure, the TAC takes the form of a table that breaks down the individual costs for various parts of the overall service, allowing for a fuller comparison between discretionary managers that may provide differing services.

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The TAC is divided into initial charges and annual charges, where the initial charges include the fee to set up the account, plus VAT, and all the transaction costs on establishing the initial portfolio.

The annual charges include the annual management charge, custodian and platform charges and the fees for other annual services such as tax vouchers, capital gains tax reports and standard valuations.

It will also include the total expense ratios and any initial charges for underlying funds held within the discretionary portfolio, although charges relating to investment trusts will not be included.

Quilter Cheviot and Rathbones have also devised a way of estimating dealing costs, to be included in the TAC, that says DFMs can either state the actual annual dealing costs or estimate the dealing costs assuming a base level of 40 per cent portfolio turnover.

The TAC will not include any adviser charge, third party administration charges for pensions or bonds, stamp duty, any allowance for dealing spreads in funds or stocks and any interest retained by the DFM on cash deposits. The charging method has not been endorsed by the FCA and is not regulated.

Pamela Reid, executive director at Quilter Cheviot, said the TAC measure will vary between discretionary managers as they offer quite different levels of service, so she said the TAC should only be used as one part of the initial research done into DFMs.

Ms Reid said she had received some interested calls from other DFMs expressing interest in using the model, but said she was concentrating on consulting firms, such as Capita Financial Solutions, who Ms Reid said were “keen to adopt this method for their new comparison tool, Fusion”.

She said the next step was to get the wealth manager trade body, the Association of Private Client Investment Managers and Stockbrokers, to endorse the model and she has set up a meeting with them for next month.