Returns hampered by high intermediation
The retail funds management space in Australia is highly intermediated, resulting in high costs to the end investor - something that fee-for-service advice could help reduce, according to BNY Mellon Asset Management Asia Pacific chief executive, Alan Harden.
"Advisers, platforms, as well as the manufacturers, all require ratings in some form. There's a number of people involved in this process, which adds a lot to the cost for the end investor," Harden said.
Harden said that Government proposals aimed at reducing such costs were "a very positive thing for the long-term growth of the industry". He added that such moves by the Government would likely lead to consolidation in the industry, which he believed would allow "the cream to rise to the top".
He said that a difference of a few percentage points in ongoing fund fees would make a big difference for individuals during the accumulation phase - particularly in the current low-interest environment.
Harden also emphasised the value of advice, and he said that a fee-for-service model could help reduce the intermediation in the industry.
"For the consumer to pay a fee rather than a commission is a good idea, so they buy the services they actually want," Harden said.
He said it was hard to say whether clients would be prepared to pay fees up front, but he believed that wise clients would do so.
"I'd rather pay $500 for advice and get that advice early up and get set on the right path - that's probably the best $500 you'll ever spend," Harden said.
Recommended for you
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Michael McCorry, chief investment officer at BlackRock Australia, has detailed how investors are reconsidering their 60/40 portfolios as macro uncertainty highlight the benefits of liquid alternatives.
Having reset its market focus to high-net-worth advisers, Praemium’s administration solution has been selected by Bell Potter in a deal that increases the platform's funds under administration by $6 billion.
High transition rates from financial advisers have helped Netwealth’s funds under administration rise by $3.7 billion in the fourth quarter of FY25.
