Following the trail of rebates and discounts

There is no simple formula for working out how much dealer groups are rebated on their fees.

Aviva general manager group marketing and distribution development Paul Northey saysNavigatorhas no standard rebating procedure.

“There is no standard template we follow with fees. The whole concept of the fee structure is based on the relationship between the platform and the dealer group and it revolves around volumes.”

Avanteoschief executive officer Serg Premier says any rebating of fees is between the platform and the dealer group.

“It is then up to the dealer group if they pass on those rebates to the planner,” he says.

“This would probably relate to those advisers who have some equity in the dealer group.”

Premier says the deal between Avanteos and the dealer group is transparent, but his company does not rebate fees.

“There is an upfront fee for customising the platform and then a fee for the volume that goes through. There can be reductions in the upfront fee depending on the amount of work needed for the re-badging and how much is done by us,” he says.

Summit market offer manager David Frost says there is an upfront fee, but it can be rebated on a dial-up basis.

“An adviser could rebate up to 100 per cent on ongoing fees,” he says. “Advisers also take the standard trail.”

Frost says all commissions are paid to the dealer group, which will then distribute them to the adviser if they wish.

Northey says Navigator fees are based on a range of commercial agreements between the dealer group and the platform. Deals with the independent market will include items from financial planning software to dealer group services, he says.

“It is arranged on a dealer-to-dealer group basis,” Northey says.

Navigator tries to be flexible because it does not own the distribution channel.

Frost says all arrangements on fees are documented and it is the responsibility of the dealer group to disclose them.

“The dealer group needs to sign agreements so all transactions are above board,” he says.

Premier says Avanteos tries to allocate his company’s costs to the payments.

“We discount for volume with the fees dropping as it increases,” he says.

“Discounting does depend on the fund product, but generally we see steady decreases as the volume increases.”

The amount of discounting is customised for each dealer group, according to Premier.

Frost says Summit also offers discounts for volume.

Platform providers also use additional fees on inflow volumes as a weapon to attract new dealer groups.

Earlier this yearAsgardandMacquariewere actively trying to attract new dealer groups to the wraps using this method. Macquarie offered additional fees ranging from 0.165 to 0.275 per cent, depending on the funds under administration.

Asgard offered an additional 7.5 per cent on top of the normal commissions for funds under administration of between $10 million and $20 million. For funds under administration of more than $100 million, the rebate was 40 per cent, which can earn the dealer group more that $450,000 in additional revenue. Trails for wraps are normally between 0.33 per cent for smaller sums and 0.66 per cent for larger sums, while upfront fees can be as much as 5 per cent depending on the wrap provider.

Additional payments are not illegal, but advisers would be required to disclose the rebates — otherwise it could be seen as a secret commission.

Platforms can also offer some rebating for clients due to their purchasing power over product providers. Northey says Navigator offers discounted management expense ratios for investors on this basis.

“It is fully disclosed and is part of the prospectus,” he says.

“We can offer those benefits to the investor because we are a larger organisation.”