Conducted by CWC Research, the study, called ‘Call My Bluff’, looked at the impact of fund share pricing caused by the ban on rebates by asset managers to platforms, wealth managers and advisers.
The research said the proposed ban removed the scale benefits large platforms had enjoyed to date through their ability to offer bundled pricing.
Under the new regime however, these platforms were looking to replace that lost revenue with higher business volumes resulting from discounts offered on fund share prices, the study suggested.
Clive Waller, managing director at CWC Research, said as platforms demanded better terms, a price war could ensue.
“A couple of asset managers have shown their hand in terms of the clean prices they will offer, the lowest so far being 55 basis points, clearly a discernible difference.
“Asset managers will want a bang for their discounted buck in the form of promised fund flows, which could mean a drift to restricted propositions and vertically integrated firms.”
Supporting this suggestion, two-thirds of asset managers who qualified for discounts said they were attracted to ‘big brand’, restricted propositions while half said they would not offer discounted terms to platforms, not considering them to be distributors and therefore being unable to influence fund sales.
This suggested D2C platforms might find themselves in a position of strength over advisory-based as they fulfil a dual role of distributor and platform.
CWC also reiterated its belief that virtually all networks and nationals will have restricted as their core model.
“If discounts add momentum to this change, the residual IFA market could become marginalised. More are likely to move to passive strategies, as it will be hard to demonstrate the benefit of independence when share prices are higher,” Waller said.
Among the adviser and wealth manager respondents, one-third said they might review their platform, while over half said they would review fund selection where discounts were in the 10-15bps discount range.
Half said they would seek an alternative fund where a fund offered a discount elsewhere but not to them.
With industry confusion almost guaranteed, David Moffat, group executive at IFDS, said: “While increased transparency is clearly a positive step, concerns are that a distinct lack of consistency around what the various stakeholder groups are looking to achieve will very possibly lead to further confusion for the consumer.”
Calling for clarity of communication, Moffat added: “A lack of standardised naming conventions as the proliferation of share classes grows and a lack of understanding around the commercial terms will possibly deter consumers. An important consideration will be educating and communicating clearly with consumers.”
Evidence of this point, 62% of platform providers anticipated a reduction in the price of funds, while 45% foresaw prices increasing across the board.
Over half of platforms said they expected difficulty in transferring funds between platforms.
The October study comprised: two asset managers; 15 platforms; four DFMs; 13 adviser firms; two transfer agencies and two data publishing houses using a combination of questionnaires and face-to-face interviews.
