When will our focus shift from fees?
The ascensionof the administration platform has been taking place for more than a decade, making it hard for planners to remember when they did not use one.
Over this period, innovation and service have been consistent points of debate, as well as the reasons behind why planners are attracted to using products such as master trusts and wraps associated with platforms.
In the second of a three-partMoney ManagementMaster Trusts Special Report series, we again look at the master trust phenomenom, focusing on what costs go into using platforms, whether they be for the client or the planner.Money Managementjournalists have also considered what pressures will be placed on fees, what sectors the pressure will come from and if they will become a point of differentiation in the future.
We have also included extensive tables from Look Research detailing the fee positions of super and non-super master trusts. What this reveals is that while there is the perception of a price war going on, the issue may be just that — a perception.
This was pointed out to journalists on a number of occasions, with commentators saying that regardless of how fees are regarded, it doesn’t make a large amount of difference unless the client feels they are being unfairly treated. Clients, as we and other media outlets have written countless times, are becoming more aware of what they should be getting for their money and what is fair service for a fair price. The same applied before the advent of platforms, except that consumers are now even more aware of what to look for.
As a result, master trust providers will come under scrutiny, not just by the planner but by their clients who will query the costs the advisers lay at their feet in the provision of services.
This is occurring even though most clients of planners have only a basic understanding of the planning process or what happens within a master trust or at the fund manager level. In short, they don’t know and they don’t care, not because of apathy but because it makes no real difference. They expect fair service for fair price, and how that is generated is immaterial.
What is material is the fact this whole focus on master trusts fees and service has been driven by the master trust providers themselves. They have offered a product that claims to make advisers’ back-office more efficient and reduce costs, while giving the planner more time to focus on providing advice.
Then in a bid to gain more exposure to planners and clients they have publicised and advertised their service offering, which in turn has opened them up to further exposure.
While none of this did any harm to the industry, what it has done is open up the competition between platform providers who now not only compete on price but also on services.
These services will in turn become commoditised and once again the focus will return to price for service, and it is at this edge that the interest in master trusts and wraps will be maintained.
And if you think this may be a stretch remember that platforms are the investment vehicle of choice for many clients and their advisers, and where there are large inflows of funds, that is where the interest will remain. Until this changes, be prepared to see master trusts and wraps firmly in the spotlight.
AUTHOR
Jason Spits
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