He said providers, such as Dimensional which is firmly in the passive camp, have gone quiet in the past 12 months because they can no longer “justify their existence”.
McBreen’s comments came after Schroders released a survey, which was unsurprisingly in favour of active funds.
In Schroders’ Adviser Survey, which interviewed 225 advisers nationally, 87% of financial advisers said they would use active funds over passive funds if the fees were the same.
McBreen said the choice was a "no-brainer", as "passive funds, apart from buying strategic exposure through some ETFs" were not worth their salt.
Performance takes a battering
Certainly Dimensional’s passive strategies, in a year that most markets have taken a battering at some stage, are down virtually across the board.
But cost, for many advisers, is a decisive factor in the funds they choose and according to Schroders’ survey 53% expect to use more low cost funds as a means of reducing the total fee payable by clients post-RDR.
Robin Stoakley, managing director UK intermediary at Schroders, said: "With the introduction of RDR advisers will be keen to keep costs low and as a result we expect to see low cost funds rise in popularity."
Schroders started to roll out its low-cost, actively-managed range in March this year with the Scroder UK Core Fund.
McBreen agrees that low cost funds are likely to gain greater traction from December next year, but said when it comes to choosing a fund he "doesn’t care if the fee is slightly higher, within reason".
Cheapest not best
"You get what you pay for. Inevitably people will produce low cost offerings in the active space, but cheapest does not necessarily mean best. It would be dangerous if advisers think just because they are demonstrating a lower AMC they should pick them.
"Advisers should not be diverted, but some will be. The regulator is driving everybody to look at the price of everything, rather than the value."
Meanwhile, lead investment partner at Deloitte, Eliza Dungworth, thinks more low-cost tracker funds will continue to launch over the coming months as RDR approaches.
She used the example of SWIP’s ultra-low cost tracker funds, with an annual charge of 0.11% on the Hargreaves Lansdown Vantage Service.
"The RDR is likely to shake up the investment management industry more than many realise and the cost of providing retail investment products across the value chain may be squeezed by as much as 50 basis points.
"If active fund managers do not reduce their fees, advisers are likely to switch to low-cost passive funds," she concluded.
