‘Unhealthy focus’ on fee cutting

As fee cutting continues apace, there are growing concerns that the debate is failing to address advisers’ key concerns over the retail distribution review (RDR).

Last week Schroders announced that it has aligned the initial charges across its fund range at 3.25% ahead of the implementation of the RDR at the end of the year.

The initial charges on 23 retail Ucits funds were lowered by 200 basis points from 5.25% as part of the move. In addition, six non-Ucits retail scheme (Nurs) funds and two institutional products saw their charges cut.

While the news will no doubt be welcomed, the focus of fund groups on upfront costs may be a distraction from the core challenges faced by the adviser community.

“Obviously the lower the fees the better, but where funds are concerned I have always felt that there has been an unhealthy focus on fees,” says Tim Cockerill, the head of collectives research at Rowan Dartington. “The key thing is doing your best to find the best possible investment. I don’t think you should be overly concerned about fees.”

Some might argue that the recent round of fee cuts are more cosmetic than structural. The key requirement of RDR is that fund fees are made more transparent as this should help clients understand what they are paying and to whom they are paying it.

“As a consequence of RDR the industry’s business model has effectively doubled in price and we are going to have to get new structures,” says Simon Ellis, managing director of Legal & General Investments.

“[But] if we look at the history of annual management fees it has clearly not been a very important criterion for clients.”