A number of wealth managers have privately warned fund groups they will be less inclined to recommend funds which give preferential prices to the biggest distributors in the market, Investment Week understands.
Some large wealth managers have told fund providers they will not actively channel money into popular funds if they are unable to secure the same ‘super clean’ share class terms as their competitors, according to multiple sources.
The race to secure the best priced share classes intensified earlier this month when Standard Life became the first platform to secure super clean deals.
The platform said 15 major fund groups have agreed to give it an average discount of 9bps, which prices an equity fund at around 66bps.
Competition
Hargreaves Lansdown has also called on fund management groups to compete for spaces on a shortened version of its famous Wealth 150 list.
The discount broker is planning to cut the list to 20-40 leading funds which will offer preferential share classes in return for access to its market-leading distribution powers.
The deadline for fund groups to submit private offers detailing the price they will give Hargreaves on their best-selling funds passed earlier this month.
However, some wealth managers have suggested those fund groups which offer distributors cheaper terms risk cutting themselves off from large sections of the industry, as fund buyers may choose not to recommend funds at higher prices.
Buying power
Others are also concerned the sheer scale of Hargreaves’ buying power could limit the amount of capacity available to other distributors for certain funds – particularly given the smaller number of offerings that will feature on the platform’s new recommended list.
The head of one the largest wealth management firms in the UK, who did not wish to be named, told Investment Week he would be unlikely to recommend funds at less favourable prices than those offered to other providers.
“Fund groups who pick their distribution will alienate the rest of the industry. It would be a difficult commercial decision, and we would have to judge each fund on a case by case basis, but if we were unable to get the same super clean terms, we would be heavily compromised to push the funds,” he said.
Comparisons
Darius McDermott (pictured), managing director of Chelsea Financial Services, agreed it would be difficult to recommend funds other providers are selling at a bigger discount.
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