Listed dealer group Count Financial has hit out at fund managers who refuse to drop ongoing fees bundled inside management expense ratios (MER).
Fund managers were refusing to budge on their MERs but the industry was silent on the issue, Count chief executive Marianne Perkovic said.
“The main frustration that I have is that the industry tends to focus on platform fees and volume-based rebates,” Perkovic told InvestorDaily.
“In the value chain the one area that never draws attention is MERs because that is one area that never goes down.
“If a fund manager sets their MER for a product and five or 10 years later it’s a multi-million dollar fund, despite their size, that margin never goes down or gets distributed back to the client.”
Count forces fund managers to lower their MER, otherwise known as an indirect cost ratio measure, for access to the group’s recommended product list and large investor base.
Industry stakeholders debated the fees issue at InvestorInfo’s Wraps, Platforms and Masterfunds Conference on September 20.
Perkovic defended adviser remuneration from platforms, saying the focus should instead be on the real “fat cats” of the industry.
“At Christmas it’s not the advisers who are running off to buy luxury cars, it’s the portfolio managers,” she told the conference.
Count is one of the largest users of BT’s Wrap Advantage scheme, which redistributes around 15 fund manager MER margins back to the platform, the dealer and the client at a monthly saving of 0.1 per cent to the client.
But looking at a fund manager’s MER in isolation was misleading, Tyndall Investment Management head of retail Craig Hobart said.
Hobart said a fund manager’s stated MER was not gross revenue but included distribution costs such as marketing allowances, volume fees and shelf space fees paid to dealer groups as well as rebates to investors.
Consumer lobby group Choice has said hidden trail commissions, which can be buried inside an MER, should not be paid because they are outdated and create conflicts of interest.
