More notably, a look at Table 2 suggests that wealth firms are beginning to reassess their charges. But this has not been as simple as companies just cutting fees. A comparison with last year’s results suggests some names have reined in their charges for both model portfolio services and bespoke offerings. 7IM, whose stated bespoke charges ranged from 0.5 to 0.9 per cent in its 2018 submission, now lists a tiered charging structure running from 0.25 to zero per cent. Whitechurch, which cut its MPS fees in 2018 amid what director Robert Dyte described as “aggressive” price competition, lists lower bespoke charges this time round.
Model portfolios have also come down in price. Both Walker Crips and Hawksmoor, which overhauled their models this year, list lower fees than in their previous submissions. Walker Crips details an MPS charge of just 0.3 per cent, down from 0.7 per cent in 2018.
However, other activity on the price front suggests that companies have also evaluated whether they are charging enough in certain areas. Hawksmoor’s stated bespoke charge has ticked up slightly, with Brewin Dolphin and Charles Stanley listing marginally higher MPS fees than in the last survey.
Relentless cost pressure and signs that growth might be less easy to come by mean DFMs need to focus on where they choose to compete, and how.
For a sense of where priorities lie, this year we asked survey participants to state the proportion of their assets accounted for by both model portfolios and bespoke strategies. The figures, listed in Table 1, do not always add up to 100 per cent. This is most likely because of the other services wealth firms might offer – Psigma, for one, also details the assets made up by its execution-only business. Nevertheless, the breakdown hints at where wealth firms are focusing their efforts.
Of those that disclose the balance, the majority have a greater level of assets tied up in their bespoke business. This reflects the fact that model portfolios have proliferated at a later stage than bespoke offerings, and have much lower minimum investment requirements. But it might also indicate that tailor-made portfolios are less vulnerable to cost pressures. Because they are idiosyncratic in nature, such portfolios are harder to compare with one another, and arguably less liable to scrutiny as a result.
A handful of companies do have a greater focus on model portfolios: Morningstar has all of its assets in models, with Parmenion and Whitechurch not far behind. Wellian has 50 per cent of assets in models but runs no money on a bespoke basis.
