Hargreaves Lansdown has questioned whether cuts to fund charges post RDR will be as widespread as the FSA forecast in its recent Platform Consultation paper, as providers struggle to cope with IFA exits from the market.
The wealth manager, which also runs direct to consumer platform Vantage, notes the FSA's comment it "would be surprised if [annual management] charges were maintained at current levels."
Hargreaves says: "We understand the logic of their expectation of a fall, whilst noting market forces are the key driver of prices rather than regulatory change.
"However, we wait with interest to see if such changes will occur to the extent FSA envisage."
It warns if the IFA population shrinks, fund managers may need to retain income to finance alternative distribution and advertising strategies.
"Therefore they may consider reducing charges, especially in the short term, imprudent. The charges some other platforms levy on product providers for their services may need to increase if they are to survive. Therefore the potential for flexibility in the pricing chain appears uncertain."
Hargreaves says there could be a reduction of adviser numbers in the UK as a result of adviser charging, coupled with an increasing trend for investors to conduct their own research using widely accessible sources of information.
"Hargreaves Lansdown sees this as an opportunity to attract further substantial numbers of clients to the high quality, low-cost Vantage service where they can administer their own investments," it says.
The firm says there are no elements for concern in the recent Platforms consultation paper and it does not perceive any threat to the group's model or sources of income.
It notes execution-only (non-advised) business remains out of scope for most elements of the paper, with this channel representing 85% of Hargreaves Lansdown's AUA.
Ian Gorham, Hargreaves Lansdown chief executive, says: "The paper contains a number of initiatives which, if properly delivered, should benefit financial services retail clients. We do not perceive any threat to the Hargreaves Lansdown model from the paper. As we already offer most of the initiatives proposed by the FSA, such as re-registration, the cost implications for Hargreaves Lansdown should be very limited.
"We also welcome the FSA's intention to focus on more timely transfers of investments in the financial services industry. The current transfer processes across the financial services industry are often unnecessarily complex and slow - usually when involving outflows from non-platform companies - and cause frustration, cost and uncertainty for clients who are exercising choice over their own investments."
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