Pre-RDR, much of the ‘power’ in the market was held by asset managers: they charged the fees and remunerated advisers/platforms via rebates/commission.
The RDR flipped this on its head. Now it is the advisers who are firmly in control, setting fees and choosing – or at least influencing – how they are distributed across the value chain.
Asset managers have moved further and further away from the end investors they serve, intermediated by advisers, platforms, model portfolios and discretionary managers. As a result, asset management is becoming more commoditised and firms need to consider the role they intend to fill in the future.
Funds are being used as building blocks within advisers’ investment propositions, switched out for other providers’ funds at the flick of a button within model portfolios. Large advice firms (such as St James’s Place) and platforms are also running their own funds, typically with investment sub-advised to asset managers at a fraction of the cost of the asset managers’ off-the-shelf retail funds.
A number of asset managers have recognised the trend and are attempting to regain some of the initiative.
- Schroders has extended its fingers into many pies: Cazenove Capital, C. Hoare & Co, its JV with Lloyds and Benchmark Capital – and by extension Aspect 8, Fusion Wealth and Best Practice.
- Invesco acquired Intelliflo last year – the subsequent MPS launch enables the asset manager to retain some link back to distribution.
- Sanlam is a hidden giant, with a number of advice businesses, Thesis Asset Management as well as its large stake in the Nucleus platform.
- Asset managers have also been taking stakes in robo advisers: Allianz in Moneyfarm, State Street in PensionBee, and also Schroders and Goldman Sachs in Nutmeg.
- And of course, there was Aberdeen AM’s 2015 acquisition of Parmenion, followed by the merger with Standard Life.
Asset managers still take the lion’s share of fees, but the tables are turning. Maybe there’s still a chance they can wrest back more control from the distributors.
Richard Bradley is research director at Platforum