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Wrap margins are starting to widen for IFAs

Nucleus says new data shows that advisers are now taking the lion’s share of the margin on its wrap while asset managers are receiving a smaller proportion.

A breakdown of Nucleus’ average annual charges across both passive and active funds on its wrap shows that 0.74 per cent of the charge now goes towards financial advice while only 0.5 per cent goes towards asset management.

Nucleus takes a 0.35 per cent cut, representing an average total annual charge of 1.59 per cent.

Nucleus chief executive David Ferguson says: “In the past, the asset management and the platform would have been far more expensive and the ongoing margin to the adviser would have been far less. On an annual basis, the IFA is now getting the lion’s share, which is how we feel it should be, but it is interesting to see it has happened already. It is absolutely apparent that clients are willing to pay more for quality, aligned finan- cial advice.

“The role of asset managers and platforms and the margins they command will be under strain from now on.”

Novia Financial chief executive Bill Vasilieff believes that “the value chain” is beginning to shift but adds that Nucleus’s figures may reflect the trend towards cheaper passive investments.

He says: “There is definitely a trend towards passive investing and the charges passive managers take are far less. Maybe that is what Nucleus is experiencing. There are more IFAs using exchange traded funds and tracker funds.

“I think that this will put pressure on active managers to perform to get the prem- ium that they charge or they will have to bring costs down. but I do think the value chain is starting to move.”

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