As platforms and fund houses continue to wrangle over basis points, Rebecca Jones investigates whether advisers, too, can secure better terms for their clients.
As the financial industry continues to grapple with the Retail Distribution Review (RDR) and its effect on provider and fund pricing, cost has seemingly become king. The current pricing tug-of-war between platforms and fund houses exemplifies this new order, where clawing back a basis point or two is top priority.
Accordingly, many advisers are becoming interested in securing pricing terms of their own. However, it seems the possibility of negotiating lower fees for clients is far less clear for some than it is for others.
Can you do it?
The biggest obstacle facing an adviser currently embarking on price negotiations with product providers is the RDR itself.
Can advisers negotiate lower provider charges?
“When commission was paid on products, financial advisers had a reasonable amount of clout. However, post-RDR, there is less room for negotiation,” explains Danny Cox, head of financial planning at Hargreaves Lansdown.
This is not least because the aforementioned post-RDR price war between platforms and fund houses has left little room for manoeuvre in the way of share prices, meaning only a few basis points remain for advisers to haggle over.
Nonetheless, negotiation is usually possible and many advisers have had success driving down client charges both with fund houses and platforms. These include BpH Wealth Management, which secured a discount with Seven Investment Management (7IM) for clients who place more than £500,000 on the 7IM platform.
According to John Redmond, paraplanner at BpH, factors that swayed negotiations included the volume of business his firm was putting through 7IM – £80m – and their long running relationship.
Both business volume and relationship are fairly crucial factors to any negotiation; however, Cox argues that any ‘position of strength’ – be it scale, efficiency or market reach – is a helpful lever.
Other areas Redmond and his firm have achieved discounts include the offshore bond space, where he claims to have secured “nil-profit” terms, and annuities, where, he says, “it is almost surprising how quickly providers might be prepared to move rates when they realise they are in competition”.
Mark Polson, principal at adviser consultancy the lang cat, notes that life companies will also often partake in deals, including platform Elevate, run by Axa Wealth.
Meanwhile, in terms of funds, it is worth bearing in mind that, even if you are wedded to a platform, many will allow you to put business through on terms you have personally negotiated directly with a fund house.
Should you do it?
But while it seems advisers with the right leverage can negotiate lower prices with providers, some question whether it is really worth it.
“I charge £250 an hour, equivalent to 25bps on £100,000. So, if I was to spend an hour on the phone arguing for a £250 discount that has cost me £250 to get, where is the value?” says Simon Webster, managing director of Facts and Figures.
Paraplanner Colin Stewart agrees, adding that advisers should be mindful of the bigger picture.
“Fees and charges are not the be-all-and-end-all. The service also has to be taken into account. Cost only forms one small part of the entire due diligence process,” he says.
Others, such as Graham Bowser, adviser at QS Financial Planning Solutions, question whether, in today’s market place, advisers need to negotiate prices with individual firms at all.
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From 1 March