Hargreaves Lansdown has begun the process of telling groups if their tenders for inclusion in its ‘core' Wealth list have been successful, and is understood to have secured prices of around 50bps for equity funds and less for fixed income funds.
According to sources, the D2C platform giant is close to finalising its new core list of funds within its Wealth 150.
As part of the process it has replied to a number of fund groups who have submitted tenders for inclusion, rejecting some and telling the failed bidders they have been undercut by rivals.
Rather than hold the line on pricing, a number of fund groups have broken ranks and decided to offer heavily discounted share classes to the country's most famous platform in order to get on its streamlined wealth list.
Investment Week, IFAonline.co.uk's sister title, understands some groups have gone to lows of around 50bps for equity funds - well below the current clean price (with no trail or platform fee included) of 75bps.
Fixed income funds have been priced even lower, with offers made below 50bps, sources added.
The scale of the discounts is a surprise because the deals will soon be visible for the first time ever.
Negotiations between platforms like Hargreaves and fund groups have always been conducted behind closed doors, but the FCA's transparency drive means all platforms and other distributors will be able to see what prices competitors get.
The deals are emerging after a selection process which has taken months. Investment Week revealed in April Hargreaves was planning to cut its famous Wealth 150 down to around 30-40 funds.
It has moved to create this core list of funds within the Wealth 150 as part of its plan to adapt to the new pricing world post-RDR.
Following the introduction of rule changes around rebates, Hargreaves opted to ask fund groups to submit tenders with either super clean or unit rebates as options, in order to preserve its competitive advantage over rivals and prevent it having to raise its own prices.
While groups that go well below current industry norms on price may argue they had to offer Hargreaves such attractive deals because of its dominant position in the market, it will nonetheless put pressure on their relationships with other distributors when they are made public.
A key concern for asset management bosses this year has been how to cope with the impact of the rules changes around rebates and payments to platforms. The fear is that by offering discounted share classes to a few distributors who have asked for them, it then becomes their new standard price for all distributors once competitors can see the terms.
Danny Cox, head of financial planning at Hargreaves, said the negotiations for heavily discounted share classes had gone "extremely well".
"As we have previously announced, we have been offered reduced fund charges for our clients by firms representing the vast majority of client assets held in funds. The work on our Wealth 150 review is in the final stages of being refined and we expect to announce our plans shortly."
When finalised, any low-cost deals will allow the business to pass on the discounted prices to customers, which in turn should help the platform grow AUM substantially from here.
Hargreaves delivered record results in the last year after announcing a 28% rise in profits to £195.2m and a 38% rise in AUM to £36.4bn
Develop ‘soft skills’
Governance reforms expected in May
Strategic partnership between firms
Catching up with the Influencers