Both large and boutique fund managers have made changes to their fee scales after asset consultant Frontier sent a letter to all external fund managers of its superannuation fund clients proposing the idea of charging flat dollar fees on investment mandates.
While Frontier senior consultant Allison Hill would not comment on which managers had made changes, she said it was a mix of larger institutions and smaller boutiques.
"Generally it has been managers in listed asset classes who have been happy to consider amendments . some members have approached us with new ideas and it has been really favourable to see those responses," Hill said.
However, not all fund managers have been so complicit and have rejected the proposals in the letter sent out late last month.
"It's been mixed. Some managers have been very receptive and keen to engage with Frontier in looking at ways to create better alignments, but there's also been a natural level of resistance from some managers and that's understandable because any change is naturally met with resistance," Hill said.
Some superannuation funds also remain unconvinced that charging flat dollar fees with an annual inflation rise, rather than an asset-based fee, would provide better value for members.
Sunsuper chief executive Tony Lally said changing to a flat fee scenario would not necessarily lead to lower fees.
"Our comment is that that doesn't drive down fees. What drives down fees is lower fees. Quite simply investment managers are paid too much for what they do, so the only way to do that is to reduce fees, so a percentage of assets isn't the issue," Lally said.
He said superannuation funds could consider putting more money into passive management.
"The first step is going to be more people putting money into passive, which will mean that there will be more capacity and we're going to see more concentration in the industry, which will mean we will be able to drive better deals," he said.
Hill said Frontier's primary reason for sending the letter to investment managers was to create better alignment, which would translate into a better deal for superannuation fund members.
"We wouldn't disagree [with Sunsuper's view] at all. Obviously lower costs is a good outcome, but what the philosophy is about is trying to better align managers, not lowering fees . although of course that is a viable outcome," she said.
