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Supermarts finally stack the shelves

Fund supermarkets Cofunds and FundsNetwork admit that part of the reason they finally struck a deal last week was because they were running out of time.

With the Isa season looming ever larger – and looking increasingly like a damp squib – both needed to boast a full complement of fund managers to help attract what business there is likely to be around.

FundsNetwork, in particular, says it “pushed very hard” to clinch the deal, which ensures the funds of Cofunds&#39 backers – M&G, Gartmore, Jupiter and Threadneedle – are available on its platform while Fidelity funds are available on Cofunds.

But while there is no doubt that the Isa season played a major part in their decision to put pen to paper, the fact that there are other fund supermarkets already able to offer unrestricted access to all providers clearly helped to clinch the deal.

Fidelity UK managing director Richard Wastcoat says: “We both realised there is no reason to continue to give a competitive advantage to others like Selestia and Skandia. My sense has been that some of the public comment on supermarkets has been that they are incomplete. This should boost the general tone of the market.”

The firms had been negotiating the deal, which they hope will come into force in mid-December, since the exclusivity agreements that Cofunds&#39 backers signed, banning them from joining FundsNetwork, expired at the end of the last Isa season.

Its eventual implementation was never in doubt but the reaction of the rivals that Wastcoat refers to cannot purely be attributed to lack of surprise.

Skandia, which believes sales through its multi-fund account were around 20 per cent higher than either supermarket in the last quarter, says the deal makes only a small dent in its competitive advantage.

Head of investment sales Angus Duncan says: “What took them so long? Fund groups do not understand what a product is – they think it is a fund. Our ethos is completely different, we provide a far more complete solution. I imagine that we talk and deal with IFAs who neither Cofunds nor Fidelity get anywhere near.”

Duncan says Skandia has more than 100 sales consultants on the road at any given time, all of whom have the advantage of being able to put IFAs in contact with other departments if their client asks for information on non-fund products. He disparages Co- funds and FundsNetwork&#39s obsession with the number of funds they offer, saying they have a “poor” number – both offer more than 600 – compared with Skan-dia&#39s offshore tax wrapper, which he claims can access any fund in the market.

Skandia&#39s proposition is well regarded by IFAs, who like its multi-manager-type approach. They rate its research tools and admin, an area where Selestia also attracts praise. Selestia has cutting-edge portfolio construction tools but focuses its sales approach on its admin capabilities.

Director Bill Vasilieff says: “Our admin systems are very, very slick – the main area in which we beat any other supermarket. We think that making the investment process as easy as possible for IFAs is what matters. We never get IFAs asking us about new funds.”

Nevertheless, Selestia is quick to point to its range of onshore and offshore bonds, something not all its competitors offer. Aside from those already mentioned, its competitors include FundsDirect, Ample, Legal & General and Har-greaves Lansdown.

Hargreaves Lansdown&#39s Vantage service has the highest number of funds – close to 1,000 – and offers big discounts on annual charges, which it describes as loyalty bonuses.

There are other benefits but its unique ownership status is also its Achilles heel as few IFAs are keen to deal with a competitor. Hargreaves Lansdown admits that it is “finding it hard” to get its message across but is prepared to set up a specific commission structure for brokers who express an interest.

According to the Investment Management Association, supermarkets as a whole accounted for 13 per cent or £51m of gross Isa sales in October. These figures are slightly misleading because reinvested income and internal fund switches are categorised as new business but they do indicate the growing importance of supermarkets.

Which of the supermarkets is winning the battle for supremacy is hard to measure as sales figures are closely guarded.

Skandia was the only supermarket we contacted which was able or willing to provide numbers. It says it accounted for 11.5 per cent of IFA-placed Isas last month. That percentage probably places them among the top three players but with supermarkets so unforthcoming it is hard to say for sure.

What is apparent is that no one supermarket is dominating. There is little consensus among IFAs about which supermarket is best.

RJ Temple&#39s marketing director Ian Millward expresses a typical view. He says: “We like Cofunds and FundsNetwork but we also like Selestia and Skandia. They do much of the research for you and are good value for money. We are trying to decide which to go with but, as there will be little in the way of an Isa season again, the choice is not that pressing.”


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