Speaking on an upcoming episode of The ifa Show podcast, Hamilton Wealth Management CEO and managing partner Will Hamilton said Australian fund managers haven’t lowered their fees like their overseas counterparts, which is making them far less competitive to advisers.
According to Canstar, the average management fee or management expense ration (MER) on a large cap Aussie equities fund is 1.01 per cent. Some fund managers are pocketing fees as high as 2.5 per cent for running mid and small cap funds, where the average MER is 1.27 per cent.
“We negotiate very aggressively with fund managers,” Mr Hamilton said. “I can get global solutions at 50 basis points or below. I can’t get that locally for active management. There are too many managers. They haven’t exactly had a great year and they are charging very high active fees.”
While the local funds management industry has already experienced some consolidation, Mr Hamilton believes the landscape will soon be populated by fewer managers who will be forced to reduce their fees.
“They have got to become realistic about the fact that their fees are too high,” he said. “They are the third bite of the cherry. I don’t think the funds management industry locally has woken up to the fact that they need to become more competitive.”
Mr Hamilton established his wholesale-only boutique firm six years ago. The group has 80 clients that each has between $5 million and $30 million in assets. Almost all of them are expats.
Before becoming a financial adviser, Mr Hamilton enjoyed a long career in institutional equities including four years in Hong Kong as the CEO of Deutsche Securities Asia Limited. In Australia, he was head of Goldman Sachs JBWere Private Wealth Management and general manager of wealth services at NAB Private Wealth.
Mr Hamilton travels regularly to gain insights from across the globe. One of the events he attends each year is FundForum International.
“Four years ago at that event you had the senior people at big companies like Allianz and Principal talking about the fact that MERs had to come down. And they have. It has been a decision that has come from the top,” he said.
“One of the problems in Australia is we are a small market. There are a lot of fund managers. One hundred thirty-seven managers and 500 strategies. Unfortunately, they are just too expensive.”