Discretionary managers have said they are not prepared to pay the standard fund prices if fund managers are going to offer super-cheap share classes to platforms.
The Standard Life platform has now revealed the names of eight firms from which it has secured deals for access to certain funds at a lower price than the standard fee of 0.75 per cent.
Standard Life said Schroders, Cazenove, Threadneedle Investments, Henderson Global Investors, Investec Asset Management and Neptune Investment Management had agreed to offer the platform discounted prices. Last week, Old Mutual Global Investors became the eighth group. A further three firms have now agreed, but not been named.
Separately, Investec Asset Management revealed it would be making six of its funds, including Alastair Mundy’s best-selling Investec Cautious Managed fund, available for 0.65 per cent to “selected strategic partners”.
Gavin Haynes, managing director at Whitechurch Securities, said: “We would not be happy if we saw competitors get a fund cheaper than us” and said he would press fund groups for the discounted shares. Given that the firm buys funds “in substantial sizes”, he said he expected to get the cheapest shares.
While he claimed getting certain funds for a few basis points cheaper would not overly prejudice his fund selection, he said fund groups would be “likely to lose business” if signing deals with only a small number of distributors as it would tempt those not chosen not to invest in that house’s funds.
Paul Chavasse, head of investment management at Rathbone Brothers, said it and the other larger DFMs, which includes the likes of Investec Wealth & Investment, Brewin Dolphin and Quilter Cheviot, could get access to the funds at the lowest price.
He said: “We will get the cheapest available units. There has to be an acceptance of what the market price is and what our commercial position is.”
Mr Chavasse said if he wanted to place a discretionary client in to an Investec Asset Management fund he saw “no reason why we would not have a [0.65 per cent] unit for that client”.
Ben Mountain, head of the investment fund research team at Quilter Cheviot said he would “absolutely” expect to get access to the cheapest available share class, as long as he could meet any minimum investment requirements set.
He said: “We are in live discussions with fund groups and if we are aware of funds being priced differently elsewhere, we would want to have a discussion as to why we would not get them.”
A spokesperson for Brewin Dolphin said it was “one of the bigger distributors and can command keen pricing”, but said price was not the only consideration when picking a fund and it was “more concerned with funds’ potential return than shaving a few basis points here and there”.
Analysis: Discretionaries on hunt for cheaper shares
While they do not have the same amount of assets that the major platforms do, the most prominent discretionary managers, such as Rathbone Brothers, Brewin Dolphin and Investec Wealth and Investment (IW&I), are larger than most wrap platforms.
Rather than just acting as a facilitator of asset purchases, the discretionary managers actively allocate funds and therefore have more commercial influence.
IW&I is the biggest wealth manager in the UK, surpassing £40bn in assets under management earlier this year, while Brewins has total assets, discretionary and advised, of £27.5bn and Rathbones £20bn.
This makes them substantially larger than the Standard Life platform, whose assets under administration hit £16.8bn as of the most recent update in August.
The big wealth managers were reportedly major players in the negotiations about cheaper share price deals back before the RDR and they look set to get in on the act when discounted prices are rolled out later this year.
