Asset managers are beginning to regain some initiative after having control of the market taken away from them as a result of the Retail Distribution Review (RDR) in Q4 2012, according to Platforum research director Richard Bradley.
Pre-RDR, much of the “power” in the market was held by asset managers – they changed the fees and remunerated advisers and platforms via rebates and commission. However, the RDR, Bardley argued, “flipped this on its head”.
The research director claimed that advisers are now firmly in control, setting fees and choosing – or at least influencing – how they are distributed across the value chain.
Since the implementation of the RDR, asset managers have been pushed away from the end investors they serve, intermediated by advisers, platforms, model portfolios and discretionary managers. As a result of this, asset management is evolving into a more commoditised service and Platforum argued that firms need to consider “the role they intend to fill in the future”.
“Funds are being used as building blocks within advisers’ investment propositions, switched out for other providers’ funds at the flick of a button within model portfolios. Large advice firms (such as St. James’s Place) and platforms are also running their own funds, typically with investment sub-advised to asset managers at a fraction of the cost of the asset managers’ off-the-shelf retail funds,” Bradley stated.
However, the firm highlighted a number of asset managers that have recognised this trend and are actively attempting to regain some of the initiative, such as Schroders which has “extended its fingers into many pies” - Cazenove Capital, C. Hoare & Co, its JV with Lloyds and Benchmark Capital – and by extension Aspect 8, Fusion Wealth and Best Practice.
Asset managers have also taken advantage of the growth of robo-advisers, with the likes of Allianz taking stakes in firms such as Moneyfarm, State Street in PensionBee, and Schroders and Goldman Sachs in Nutmeg. Aberdeen AM also acquired Parmenion in 2015, followed by its merger with Standard Life.
As it stands, asset managers still take the lion’s share of fees, but the tables are turning. Although, platforum noted there’s still a chance for then to wrest back more control from the distributors.
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