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‘Reckoning’ looms for fund management fees

 

There will come a “reckoning” for fund management fees as advisers continue to pressure the rest of the value chain, experts have predicted.

Speaking on the FTAdviser podcast, Mark Polson, principal at the Lang Cat, said the asset management industry had done a “remarkable job” at resisting fee pressure over the past few years but that it “can’t go on forever”.

He said: “In most markets, you expect the person closest to the customer to beat up the rest of the supply chain to preserve their own margin.

“We’ve seen really good pressure on platforms by advisers to get their costs under control.

“The fund management industry has done a creditable effort in resisting...but there will come a reckoning and this is going to change.”

Analysis from the Lang Cat last month predicted the total cost of ownership for clients’ CIPs would drop by 50 bps over the next five years.

Mr Polson was discussing the role of centralised investment propositions with Nick Eatock, CEO of Intelliflo, and Tim Harvey, director and adviser at HR Independent Financial Services.

Mr Harvey agreed fund management costs would come down. He said: “We’ve seen the exposing light of Mifid II and the declaration of who is diving into my clients’ back pockets.

“There will be an inevitable pressure downwards, but not on advice at the front end.”

Mr Eatock agreed advice fees were the “least likely bit to drop”, but argued that advice firms which had integrated technology, and therefore had more clients than others, saw a “very slight downward pressure” on fees.

He added this was “more than compensated” by the larger client banks.

The podcast guests also discussed how advisers could improve the efficiency of their CIPs, the trials and tribulations of portfolio balancing and client disclosure, and whether advisers could begin to service clients that were “less attractive” from a business standpoint.

In a further segment, hear about the pernicious problem of scams and the CII’s exam debacle from FTAdviser senior reporters Rachel Mortimer and Amy Austin.

To listen to the full podcast click play on the video above or listen on Apple Podcasts, Spotify, Stitcher or Acast.

imogen.tew@ft.com

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