Colonial First State (CFS) will reduce the fees on the First Choice investment platform and introduce 12 further investment options, including a boutique multi-manager option, from the start of May.
The fee reduction will vary, dependent on investment options from 0.05 per cent to 0.5 per cent, with the average fee figure dropping from 1.85 per cent to 1.72 per cent.
The price drop will apply to 47 out of 51 current investment options with the unchanged options being in the area of cash and mortgage securities.
CFS chief executive John Pearce says the reduced platform fee will still retain a 60 basis point trail for advisers and the fee reduction costs would be entirely borne by Colonial.
FirstChoice, at the end of January, had $5.2 billion in funds under administration (FUA), and has attracted $200 million to $300 million in inflows per quarter since launching in May 2002.
According to Pearce, the scale of the platform plus the backing of Colonial under the Commonwealth Bank meant the group could reduce costs or maintain its margin.
“We have generated a virtuous cycle with the increase in funds under administration, which meant we could maintain our margin or spread the win with others,” Pearce says.
“We had two choices and that was to keep the margin or pass it on and increase market share, and the management team is focused on the latter. With the increasing revenue base coming from FUA, we have been able to remove more of the manual processes and so none of the costs will be drawn from the fund managers.”
The new managers added to the FirstChoice menu are Perennial, Investors Mutual, Barclays Global Investors and JBWere, with FirstChoice blending new and exisiting boutique managers into a specialised Australian equities fund, as well as offering a PM Capital Australian Share Fund and a Geared 452 Australian Share Fund.
The new pricing model and the expanded options will be available from May 1, at which time Colonial will also add administration tools including adviser transaction, client reviews and new business management reporting. Advisers will get their first glimpse at the new features at roadshows during April.
