Advisers urge caution in charges war

Advisers have urged fund platforms not to lose focus on the key issues of service and technology as the battle to secure the cheapest management charges from fund providers rages on.

Giant adviser-facing platform Skandia last week announced that its WealthSelect range of funds, many of which are run by third-party asset managers, would offer average annual charges of 0.52 per cent.

It comes after direct-to-consumer fund broker Hargreaves Lansdown recently said it had secured average prices of 0.54 per cent from the managers of its Wealth 150+ list of recommended funds, laying down the gauntlet for the rest of the industry.

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Both rates are far cheaper than the standard rates of 0.75 per cent that most investors will today pay to buy the ‘clean fee’ shares of standard equity funds.

However, advisers who spoke to Investment Adviser said they were more concerned with other factors than their clients being charged a few basis points less from funds listed on one platform compared to another.

Peter Matthew, managing director of Jacksons Wealth Management, said cost-obsessed platforms risked knowing “the cost of everything but the value of nothing”, saying advisers will not “lose sleep” over small price variations.

He said the platforms that were really at the forefront of the industry were the ones “focusing on service and utility to advisers rather than one or two basis points on fund charges”.

Out of the various wraps and platforms that service financial advisers, only Skandia and Standard Life Wrap – which has hinted at an average nine basis point price reduction – have tipped their hands on their fund manager price deals. But fund managers have said that other platforms are also pressing them to offer reduced prices.

Andrew Alexander, head of investments at Three Counties, said platforms were preying on advisers’ fears that they have to focus on charges or risk losing clients to other, more cost-conscious, adviser firms.

“Most of us are not [in competition]. But if you have the view that you are then there’s more incentive to be the cheapest.”

He also said he cared far more about the service provided by a platform, adding he would be willing to pay a little bit more for high levels of service.

The main platform that he uses is Transact, which he said was a little more expensive than most but was “second to none” in terms of service.

Skandia’s WealthSelect list features funds launched by Skandia and managed by some of the UK’s leading fund management groups, including Invesco Perpetual, Threadneedle, Schroders and Artemis.

Skandia is set to reveal the exact pricing it has secured for each fund by the end of February.

Paul Feeney (pictured), chief executive of Old Mutual Wealth, said: “The retail distribution review has increased adviser demand for high-quality, high- value portfolio management services and we are leading the response. Through WealthSelect we give advisers access to the very best brands in the market.”