Consensus is building in the wider financial services industry that platforms and asset managers should shoulder the burden of lower financial advice fees being demanded by clients.
Speaking at a recent Vanguard Investments roadshow in Melbourne, Vanguard head of intermediary distribution Michael Lovett said financial planners should be putting pressure on other parts of the value chain to meet client demands for lower fees, rather than cutting their own cost margins.
Lovett said that advisers could give clients a fee discount for advice, but suggested that the rest of the value chain – including active managers – should pay for it.
"If you were to play around with the platform fee, you could bring that down to 0.4 per cent, while the manager fee could be as low as 34 basis points … you can bring the fees to the client down to $4,000, saving 20 per cent of the fees the client is paying," Lovett said.
Lovett used figures of 0.5 per cent for a platform fee, a manager fee of 0.9 per cent to 1 per cent, an advice fee of 0.5 per cent, and a dealer group fee of 0.1 per cent.
Funds management company fees could also drop, he said.
With the amount of work required from advisers, their costs should be kept intact, while other parts of the value chain should come under pressure, he said.
BT Financial Group head of platform product Kelly Power said they were working to enable advisers to offer low-cost advice.
The growth in one-off advice and scaled advice was putting more pressure on the platforms to offer one-off fee capability to charge for transactional advice, she said.
The entire industry was facing margin compression and BT was responding by offering a broader range of index options and launching low-cost alternative platforms, Power said.
Advisers shouldn't carry the whole burden of low-cost advice, she added.
However, Pengana Capital portfolio manager Steve Black said that clients would accept higher costs if the fund manager was providing added value.
The industry was evolving to the point where if a fund manager couldn't provide added value then they would lose customers, he said.
A soft market always drives calls for lower fees, Black said.
The director of planning practice at Capel Associates, Richard Capel, said everyone had to swallow the cost of lower advice fees.
"It's our job to provide feedback to platform operators, and if we have to take a haircut because the client's feeling the pinch with their portfolios, then all of us in the value chain should share in the reduction," Capel said.
Brokerage costs, platform costs, and retail and wholesale fund managers should all be under the spotlight, he said.
Financial advisers have a duty to minimise any costs in being able to deliver performance, he added.
