Advisers to weather fee squeeze, says CBA

Margins for Colonial First State (CFS), the Commonwealth Bank’s funds management arm, are holding firm despite heavy downward pressure on fees and increased competition in the platform market, a group of the bank’s division heads announced yesterday.

While admitting that there would be future pressure on margins in the platform administration market, CFS chief executive John Pearce maintained CFS would remain profitable as a result of its competitive fee offering, and quality of service.

“I’d say that there is only one area of the value chain where you could unequivocally say that there’s going to be declining margins and that’s in administration,” Pearce said.

The group’s margins in the platform administration division where down 0.03 per cent from the previous year, he said.

CBA insurance and investment services division chief financial officer Michael Cant said CFS should be able to hold its margins at current levels.

For advisers, Pearce ruled out any reductions in margins.

“It’s not very obvious at all that we’re going to have a crunching in margins there,” he said.

“If you’re a high end adviser with a fee for service business model, there’s no reason why your margins can’t increase, in fact, the advisers that we speak to that have converted their business model to that are seeing increases in their profitability.”

The bank also revealed that 44 per cent of the inflows into its flagship FirstChoice master trust came from internal advisers, while 39 per cent came through external and 17 per cent were from CBA aligned advisers.