FOFA giving rise to low-cost platform
The introduction of the Future of Financial Advice (FOFA) changes could spur the emergence of a new player in the platforms and wraps sector, by driving advisers who are no longer receiving volume rebates into the arms of the low-cost ASX Wealth Management Services platform.
ASX general manager of equity markets Richard Murphy acknowledged that the new wealth platform, colloquially known as AQUA, would significantly lower the traditional costs of being listed on a platform.
While funds would have to pay a listing fee for going on AQUA, the cost is likely to be a small fraction of the shelf space fees charged by platforms, Murphy said.
The ASX hasn’t yet made the pricing public, but applications and redemptions of units in a fund would cost a flat fee per software message sent by the ASX CHESS register and settlement system. That could cost as little as $2, Murphy said.
The AQUA platform would list daily prices for a wide range of funds, and brokers, planners, retail and wholesale investors would be able to buy or redeem units in the fund through CHESS, which would be paid for through a client’s cash management account. The lack of paperwork and manual processes will also lower costs.
However, there was still a role for traditional platforms in distribution and tax reporting for clients. The ASX was not proposing to move into that space, Murphy said.
ASX trading fees and settlement fees are far cheaper than what platforms charged, and over time will create a “headache” for the big wrap accounts, according to Arthur Naoumidis (pictured), group chief executive of Praemium.
“If you could trade everything on the ASX, why would you bother?” Naoumidis asked.
Praemium is eager to help the ASX launch the platform, he said.
Praemium’s client base is largely invested in direct equities. Praemium plans to use its V-Wrap platform to run the administration for its clients, which would then only cost a flat dollar fee instead of a percentage of their assets, Naoumidis said.
Boutique fund manager Bennelong is openly interested in listing on the AQUA platform, according to director of distribution Andrew Aitken. He added that Bennelong is staying engaged as the project progresses.
The ASX is likely to go live with the project in the first quarter of 2012, according to Murphy.
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