Brooks Macdonald is the latest company to cut fees for its discretionary fund management service, the second time in a year that the provider has reduced its charges.
Its fund of funds range is currently operating with a charge of 60bps (inclusive of VAT) on average, but it is preparing to cut those to 42bps plus VAT on some platforms. Its business development director,
Andrew Denham-Davis, said it will be difficult for the company to reduce its fees below this level, although some other DFMs such as London & Capital cite fees at 25 bps.
In October last year, Brooks Macdonald reduced its model portfolio fees from 75bps to 50bps.
The fees attached to DFM services are often seen as being both higher and less transparent than charges in other areas. Between service charges, dealing fees, performance fees, custody charges, tax wrappers and negotiated discounts, it can be difficult to get clear answers and solutions around what fees investors will pay.
Mark Polson, principal of Edinburgh-based platform and specialist consultancy the lang cat, thinks this could be indicative of an oncoming trend. “Brooks Macdonald were a bit out of line with the rest of the market in that they were a bit more expensive. Clearly as advisers are looking more closely at these arrangements costs come into it, and we would expect that market to flatten.
“The approach could be that some DFMs are creating another superclean market, for example where you can have Brooks Macdonald but it’s cheaper to get it via one platform than another,” he said.