Former executives at Goldman Sachs and JP Morgan have launched an online discretionary fund management (DFM) service which aims to counteract criticism over the industry’s lack of fee transparency.
Netwealth Investments, which officially launched on 23 May, is the brainchild of Charlotte Ransom and Thomas Salter, who came up with the business idea a year ago.
While the investment manager will be able to service consumers directly, the two founders also plan to partner with advisers to offer its services to “asset-rich and time-poor” clients.
Rather than targeting the mass market, the company aims to tap into the wealth management client base, such as those customers serviced by Rathbones, St James’s Place and Brewin Dolphin.
Speaking to Financial Adviser, chief operating officer Mr Salter, who was previously a managing director at JP Morgan, suggested many of the current DFM players in the market create an “illusion of bespoke” by tinkering with ready-packaged portfolios.
Rather than offering bespoke portfolios, however, he explained Netwealth offers a bespoke service instead, where the client can tailor the service according to their requirements.
Mr Salter also said the firm plans to stand apart from some traditional DFM players by ensuring the service is transparent with its management fees.
DFMs have frequently come under fire for being opaque when it comes to cost, and firms have faced increased pressure from regulators following the Retail Distribution Review to make their prices clearer.
The Netwealth founder said improvements to fee transparency were “long overdue” and argued that asset management businesses were moving quicker than wealth managers when it came to ensuring the overall fees were completely clear.
“If people understand what they are paying for, it will help to drive fees down,” he said.
Netwealth offers seven model portfolios, which use digital investment tools paired with access to the company’s own professional advisers for when clients want human interaction.
Blair Cann, senior partner at M Thurlow & Co, said: “I reject any suggestion that it is automatically beneficial to outsource the choice of investments for each client to DFMs.
“As a certified financial planner and having been in the industry for more than 50 years, I believe it is my responsibility to produce an individual portfolio for each of my clients and nothing in the proposals outlined has affected my thoughts on the matter.”
Anyone who uses the new service and is under the impression that if things go wrong they can rely on the fact that they have outsourced the investment process to avoid any comeback, may well be being rather optimistic.”