Financial advisers have, so far, been relatively passive observers of the fascinating fight among the execution-only players regarding fund and platform pricing, but should they remain so?
The platforms are witnessing an escalating price war as each offer is scrutinised before often being criticised and even occasionally trumped.
The Platforum, which is doing some excellent work, has noted that Hargreaves Lansdown comes in cheaper than its rivals only on its much narrower buylist the Wealth 150+ because it charges a higher platform fee. This takes it above Fidelity and Barclays on a wider number of funds. Fidelity has attempted to spike HL’s guns by echoing John Lewis’s price promise of never to be knowingly undersold on a fund, certainly in the near term.
On that basis, I think it is probably fair to say that this is the biggest price shake up I have witnessed in financial services in nearly two decades – certainly other than those imposed directly from above with a price cap.
Given that is the case, surely it must have a big impact on the advised size of the fence. But how?
That remains the $6m question – or probably quite a lot more than $6bn.
First, as investors peruse the new price structures –and they are rather complicated for all the promised simplicity – it is clear the price of investing has fallen and by more than mere basis points.
A question many advisers will also surely be asking is whether we can access these prices for our clients, or even beat them.
It will also be interesting to think about who advisers can ask. If they use FundsNetwork, for example, they can go straight to source.
They may ask their own platform if it is really being competitive or getting the cheapest rates, certainly if they are outside the established norms for execution only.
Some of the financial planning-based platforms suggested that they were getting close to accessing institutional fund management prices. Are they now?
Different advisers may have different questions. How do the prices for well-known active funds compare with what is on offer from the execution-only players? What about passive funds? Are the new ‘superpassives’ cheaper for planners or do-it-yourselfers?
The question is complicated further still by the restricted/indie divide.
The most cynical commentators believe that many restricted arrangements are at least partly an exercise in preserving margin among platforms of various guises, networks and advisers.
Of course, all this may settle down. The big competitive forces may really prove to be relatively small ones with some changes in the non-advised market, but a lot of investors are staying put with the firms they know. And the advised market may therefore experience ripples, not substantial waves.
But I wouldn’t bank on it. Advisers may do well to start asking whether they are also getting access to the best value fund management, including – particularly for those in the active school of thought – the best fund managers for the best value.