Investments  

Standard Aberdeen could 'get more aggressive on charges'

Standard Aberdeen could 'get more aggressive on charges'

Cost savings achieved as fund behemoths Aberdeen and Standard Life merge have been greater than expected and may lead to the firm becoming more aggressive on lowering charges, according to Michael Beveridge, head of UK Wholesale at the firm.

Standard Life and Aberdeen Asset Management formally merged on 14 August 2017.

Mr Beveridge said the cost savings as the firms move to better integrate are likely to be in the area of £250m, higher than the number it had previously suggested, which was £200m.

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He said that while advisers have shown they are willing to pay for active management on behalf of their clients if the performance justifies it, he is aware of the rise of passive investments and the resultant pressure on active fees.

He said  Standard Life Aberdeen “could be more aggressive” in terms of the fees and charges it levies on investors once the combination of the two businesses is complete.

He said: "We want to be as efficient as possible and to provide good service and support. We think service is important, and we think that if the performance is good enough no one questions the price. But we could be more aggressive on price." 

In April the Financial Conduct Authority declared fund management companies must prove they give investors a worthwhile service for their fees as part of a raft of measures being introduced by the regualtor to ensure asset managers act in the best interests of their clients. 

In a 74 page paper the regulator said it will require fund managers to make an annual assessment of how their products provide value for the fees paid by investors.

However in a concession to the industry following feedback to its Asset Management Study, the FCA has tweaked the wording of its rules to shift focus away from the phrase "value for money" to a general requirement that fund managers "assess and justify to their fund investors the charges taken from the funds they manage in the context of the overall service and value provided".

Fund houses must assess the value of each fund against a non-exhaustive list of prescribed measures, conclude each fund offers good value to investors or, where it does not, take corrective action, all the while explaining the assessment annually in a report made available to the public. 

Dan Kemp, who runs the managed portfolio service at Morningstar, said he views cost of investing as a significant driver of returns, and as such, tends always to have significant exposure to passive funds in the portfolios he constructs for clients.

He added that he expects there to be “rationalisation” of the fund range operated by the combined businesses, with funds being culled or merged away where there is duplication, with the largest and best performer fund from either firm continuing to exist. 

Paul Gibson, an adviser at Granite Financial Planning in Aberdeen, said he rarely uses active investment products due to the level of fees.