Fees: the new fuel added to the master vs wrap fire.

With three conferences on client portfolio management systems scheduled for Sydney over the next week or so, the master trust versus wrap account war appears to be escalating.

So the recent announcment by top master trust provider Asgard that it will increase adviser remuneration on its master trusts is a significant move.

Asgard, part of the Sealcorp group now owned by St George Bank, has lifted its fees paid to advisers by up to 70 basis points, including volume benefits which add between 7.5 per cent and 40 per cent to the total administartion fee paid to advisers.

Asgard is the leading the master trust provider in Australia and has funds under management of around $5.25 billion.

The decision is particularly interesting because of disquiet amongst over the amount of money paid to Sealcorp principals after its sale to St George Bank.

Many of the advisers who had helped to build the value of Sealcorp by placing their clients money into its products received scant financial reward for their efforts when the group was sold for $272 million in December 1997.

The response from some advisers has been to form co-operatives and run their own master trusts, thus gaining equity value and direct participation in funds under management. This has become possible due to the rise of outsourced back-office administration providers such as BT Portfolio Servcies.

But Asgard's decision to raise fees shifts the goalposts on intermediary remuneration, and the result could well have long-term ramifications for all portfolio service providers, including wrap account and master trust operators.

Over the past 12 months, the debate over whether master trusts or wrap accounts offer the best value and convenience for clients has raged, not least in the pages of Money Management. Many observers, including our columnist Tom Collins, have predicted that wrap accounts will eventually supersede master trusts as advisers' preferred portfolio management vehicle.

But the Asgard move indicates that master trust operators will not take such a development lying down. In lifting their fees to advisers, Asgard has sounded a warning to their competitors that remunerating intermediaries more generously will become a competition issue in future.

On the surface, that loooks a good thing for advisers. But the industry must avoid repeating the excesses of several years ago, when insurance companies went head-to-head offering progressively more ridiculous incentives such as development loans to adviser groups.

However, the pressure now appears to be on Asgard's competitors to match or better Asgard's competitive new fee structure or risk losing business to the industry leader.

When and how these issues will come to a head is still uncertain. Perhaps those advisers brave enough to attend any (or all?) of the next week's conferences might find out.