New research has suggested managed funds market participants could reduce costs if they were to adopt the proposed Australian Securities Exchange (ASX) Managed Fund Service.
The research, conducted by Rice Warner, was based on responses to a questionnaire and in-depth telephone interviews with market participants, including brokers, dealer groups, fund managers, platform providers, SMSF administrators and unit registries.
The key findings were that:
- The underlying cost of buying units in a managed fund through a broker, financial adviser or platform are typically around $43 per transaction. This reduces to around $18 for broker and platform transactions under the ASX Managed Funds Service – a saving of $25 per transaction;
- Different costs and levels of saving apply depending on the intermediary used, and are different for buy and sell transactions respectively. The savings ranged between 35 per cent and 60 per cent for different transaction types;
- Potential transaction processing cost savings across the managed funds industry from adopting the ASX Managed Funds Service could be between $145 million and $215 million per annum, although this assumes 100 per cent adoption.
The Rice Warner analysis said there was very little understanding amongst many participants – particularly advisers – of the costs involved in the current, highly manual process for buying and selling managed investments.
It said deeper consideration of these costs was likely to lead to demands for further automation, which the ASX Managed Funds Service provides.
"The findings in this report demonstrate the potential cost saving benefits the Managed Fund Service will deliver to managed fund industry participants and investors, and ultimately reaffirms our commitment to develop the service," ASX Capital Markets general manager Richard Murphy said.
