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0.3% deal threatens to widen squeeze

The deals that Standard Life has struck with the fund groups on its panel could lead to a crippling margin squeeze as rival platforms seek similar agreements with fund firms.

Industry observers believe that by agreeing to run money at 30 basis points, as some groups are believed to have done, the panel members have prompted rival platforms to reassess their existing fee structure.

Skandia, which has a renegotiation clause triggered when any group signs another deal undercutting its own, is understood to have already been approached by firms resigned to striking a new agreement.

The groups are likely to argue that the Standard deal will pull in enough money to justify the institutionallevel rates. However, observers warn that this could cause problems in running the funds themselves.

Hargreaves Lansdown head of research Mark Dampier says: “The groups are asking for trouble. In the end, they could destroy their own margin. You have to get a hell of a lot of money to make it work but then will the funds perform?” One industry source says: “It will have a major impact. The platforms will turn around and ask why they are paying far more, especially if they hold a lot of their money. They will want a similar deal and that will really squeeze the groups.”

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