Discretionary cost template use widens with WMA offering

The discretionary management industry is increasingly making use of specialised templates to illustrate the total expected cost of its portfolios.

Quilter Cheviot and Rathbones last year announced that it had created a “total account cost” (Tac) measurement, aiming to give an indication of the total cost of ownership for discretionary portfolios.

And last week the industry trade body, the Wealth Management Association (WMA), said it had developed a cost “template” that many of its members were now using.

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Tim May, chief executive of the WMA, said the trade body makes available a template to members that can be used to answer specific cost queries, particularly for new clients.

He said the template was flexible and needed to be adjusted for various assumptions based on the type of discretionary portfolio and the client’s situation.

He said that while the templates may differ from the exact Tac model proposed by Quilter Cheviot and Rathbones, they covered similar measures and “quite a lot” of the WMA’s members were using such templates.

He said: “We are extremely keen on total transparency. We are very happy with the template and it is available if anyone wishes to use it.”

Mr May said that among his members there were a huge range of “business models and charging structures” and that this meant any indication of cost needed to be very flexible.

The trade body would not therefore go out and actively endorse and lobby for any one measurement, such as the Tac because to do so would be to “dictate” to its members, which Mr May said was against the principals of the WMA.

The increased use of cost templates will be welcomed by the adviser community to increase their understanding of the total costs of investing in a DFM.

The Tac had attempted to do that, but Quilter’s Pamela Reid said it had been “very hard to get much momentum” behind its adoption more widely in the industry.

The total account cost takes the form of a table that looks to break down the various costs associated with investing with a discretionary manager.

Beyond the headline management fee, it includes fees such as initial charges, the underlying cost of funds that are held in the portfolio and an indication of the dealing charges that are associated with portfolios that buy and sell equities.