A new managed-fund fee structure from BBL Funds Management could potentially change the way financial planners run their businesses.
BBL Funds Management, the pioneer of no-load products in Australia, has modified its range of index funds to allow financial planners to choose how they build their revenue base.
BBL’s Director Trust index funds were launched early last year, aimed primarily at DIY superannuation clients and marketed on their very low management fees.
“No-load” products have made huge inroads into the market in recent years, with low management fees driven in part by not paying commission to advisers.
Prior to the roll-out of BBL’s new facility, only advisers who charged by the hour could generate revenue by recommending BBL products. But BBL research has found that only a small number of advisers charge hourly rates, with managing director Norm Sinclair estimating there are less than 400.
He says although there is a trend towards fee-for-service among financial planners, most fee-charging planners also charge clients a percentage of funds under advice. BBL’s new facility collects the adviser’s agreed remuneration from the client’s account and pays it to the adviser.
The new facility also offers what Sinclair claims is a first. It allows advisers to charge a performance fee based on the success of asset allocation recommendations made by an adviser.
“This is really aimed at the high-end professionals in the market who can switch asset allocation as market conditions change. Advisers can then share in the extra returns earned by their advice,” he says.
“At present fund managers tell financial planners how to run their businesses through the commission structure. This new system aims to give the control back to the adviser,” Sinclair says.
