Chris Freeman
BT Financial Group is about to launch a new initiative on its wrap platform that will see selected fund managers enjoying a range of exclusive benefits while investors save on administration costs.
Due for release in February, Wrap Advantage consists of a group of fund managers that will receive consolidated distribution and special support from the platform provider.
In return, the selected fund managers have agreed to reduce their management fees.
This is contrary to earlier reports that suggested the Westpac-owned group had pressured the fund managers on its wrap to reduce fees for its own benefit.
BT head of wealth and wrap solutions Chris Freeman said the program would deliver multiple benefits to the participating fund managers.
“Our wrap platform has over 50 wrap badges on it representing about 5,000 planners, and Wrap Advantage means the fund managers can get access to all of those financial planners and dealer groups,” he said.
“Some of the dealer groups we represent on our platform are some of the better dealer groups in the country — Count, Lonsdale and Genesys — so it’s very attractive to the fund managers.
“If they had to go out and see those 5,000 advisers separately it would be a lot more expensive.”
Freeman said that in return for agreeing to reduce fees, BT would provide the participating fund managers with key reporting data on which advisers were writing business in order to maximise the inflows of each fund manager.
However, Freeman said the purpose of Wrap Advantage was to ultimately drive scale benefits from fund managers to investors.
“We’ve seen the evolution from retail funds management into mezzanine type rates of funds management and now it’s moving into institutional — as the platforms gain scale they can derive scale benefits and pass those benefits onto investors,” Freeman explained.
“We are paying the Wrap Advantage rebate back to the investors by way of a reduction in their wrap administration fee — we estimate that this will eventually represent about 10 per cent of their total wrap fee.
“There are big margins in funds management and, because we are sharing some of that margin, the investor is going to be more positively predisposed to investing in those funds.
“In other words, we think the investor benefit will generate more behaviour from the advisers and investors to write more Wrap Advantage funds.”
Wrap Advantage will feature more than 60 different fund management options, of which more than a third have received an AA or A rating from van Eyk or a ‘highly recommended’ rating from Lonsec.
Freeman said the first group of fund managers to be included in the program would feature a maximum of 17 “quality” managers, who have already undergone months of negotiations with the platform provider.
