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Supermarkets sweep in for fund showdown

The fund supermarket world is about to get exciting. As four of the UK&#39s

leading fund providers get together to launch an IFA-based online

supermarket in November, the stage has been set for a big showdown.

The new company, to be called Consolidated Funds, will be set up with

£20m from Gartmore, M&G, Jupiter and Threadneedle which have around 30

per cent of the IFA market. Consolidated will have an independent board.

The news comes just a week after Fidelity unveiled FundsNetwork, the UK&#39s

first IFA-based supermarket.

Fidelity has a short-term advantage as it is alreadyrunning. Its

experience in the US has reassured IFAs it has a reliable platform.

Its biggest disadvantage may prove to be a factor beyond its control – the

fact that it is Fidelity.

It needs to convince fund providers it will remain impartial and not take

a competitive sales advantage as platform manager. By holding all the

accounts, it is privy to market information about its competitors and will

gain some advantage from competitors&#39 names being associated with its


These reasons have been central to the decision to create Consolidated Funds.

M&G director of product development Bill Vasilieff says: “We were never

going to back a competitor. We think it is very important this kind of

service is not run by a fund manager.

“The US situation has shown that if a fund manager runs the supermarket,

they gain a huge part of the market and we instantly lose a large part of

our market share.”

The issue of competitive advantage is one that Fidelity disputes.

Associate director Dave Cowdell says he welcomes the competition but

insists FundsNetwork will offer the same levels of impartiality as


“From a regulatory perspective, UK polarisation rules ensure no fund

company is promoted above another in the supermarket,” he says. “Second,

our primary objective is to keep the volume of funds ticking over,

regardless of which funds are being bought.

“And finally, if the UKmarket follows the US, where 80 per cent of sales

are carried out by IFAs, fund choice clearly does not come downto Fidelity,

it comes down to the adviser.”

The issue of impartiality seems to be where the battle will take place.

Fidelity argues a company owned by four major fund managers is open to all

the same allegations as a platform owned by one fund manager. But

Consolidated insists the four firms will have no more input than their

initial investment and establishment of the supermarket.

As other fund managers make their evaluation of the two supermarkets,

Consolidated will see its provider list grow. From initial talks, it is

confident it will have the power to get companies on board.

Threadneedle head ofe-commerce Phil Goffin says: “We have spoken to a

number of the top 15 fund providers and the feedback has been extremely

positive. I would be very surprised if they did not want to participate. As

we have said before, we did not join Fidelity because we did not want to be

disassociated from the advisers.

“They are extremelyimportant to us and we did not feel comfortable having

another person between that relationship.”

The most important people in the equation, however, must be the advisers

themselves. With both supermarkets offering white-labelling deals where

IFAs will be able to brand the platform as their own, the major advisers

will be faced with a choice to pledge their loyalty to one supermarket or

the other.

Four of the UK&#39s biggest IFAs have signed letters of intent to go with

Fidelity but Consolidated&#39s entry could change things. For the moment, the

four IFAs are standing by their deal with Funds Network but admit that the

situation may change over the coming weeks.

Chase de Vere investment adviser Justin Mowdray says: “If I had to place

money on who will be successful, I would still bet on Fidelity at the

moment. They have a good record in the US andare the first IFA-based

supermarket in the UK, which will give them a good competi-tive advantage.”

The letters of intent signed by Chase de Vere, Best Investment, Hargreaves

Lansdown and Torquil Clark to go into white- labelling deals with Fidelity

are not legally binding. Fidelity says there will be no lock-in clauses

forcing IFAs to continue the agreement.

With the power of choice in the hands of the IFAs, the four big IFAs may

continue their deals with Fidelity until Consolidated is running and then

review their position.

Although the supermarkets try to play down the issue of which fund

providers are on board, there is likely to be a battle over the coming


IFAs are looking for aservice where they can trade all the funds they need

ona single platform, so who ison signed up will undoubtedlybe a major


Perpetual is deferring its decision to sign up until the issue of a

possible takeoveris resolved.

Meanwhile, Fidelity is playing it cool. Cowdell believes that after a

battle which will see many new supermarkets set up and then die, the

survivors will have all the fund providers on board.


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