Citi analysts have downgraded platform giant Hargreaves Lansdown to a 'sell' due to expected pressure on revenues as platform fee competition intensifies.
Hargreaves shares were trading 3.9% lower at 972p by mid-morning.
The broker had previously upgraded Hargreaves from 'sell' to 'neutral', but said its shares have rallied too strongly since then.
It warned the platform's higher fees compared to peers, combined with a more flexible pensions regime, could lead clients to explore other post-retirement options.
The report said: "We forecast a decline in fund platform fee rates below Hargreave Lansdown's 0.44% guidance. [Its] pricing remains at the high end: established peers charge 0.35% and new entrants 0.25%.
"Perhaps competition will mean less asset under administration growth rather than margin decline - but either way, we see revenue pressure as likely."
Although the platform's stockbroking income is growing, the analysts labelled it 'volatile' and said the premium price to earnings ratio of 27.3x can no longer be justfied.
They reiterated their target share price of 830p, well below the current value of 972p.
The review accompanies a wider forecast predicting asset managers will be forced to cut fees further in the coming year.
Citi predicted further pressure on asset management fees, due to competition from passive funds, buyer power, the maturity of previously 'hot' asset classes and regulatory scrutiny.
It predicts Hargreaves Lansdown, Jupiter, and Man Group are the most likely groups to cut management fees.
The analysts also observed "a clear shift" of flows towards larger fund managers in recent years, and predicted the trend will continue.
Firms with a high proportion of multi-asset products, such as Schroders and Aberdeen, are likely to benefit from the demand for post-retirement products, the report said.
Speaking to Investment Week in October, Novia chief executive Bill Vasilieff questioned whether large platforms such as Hargreaves Lansdown could afford to reduce fees further.
"Anything much less than 22 to 25 basis points is break-even," he said.
Citi Report: The winners and losers
The winners
Schroders
This fund manager benefits from economies of scale, a strong multi-asset offering, a healthy balance sheet and good fund performance. It is well-positioned for pension reform.
Aberdeen
Another fund manager benefiting from scale after the acquisition of SWIP, and a range of in-demand multi-asset products. However, Aberdeen may also face margin pressure.
St James's Place
Higher demand for pensions advice and greater inflows into pensions products are likely to benefit this wealth manager. With more than 60% of assets under management invested in equities, the firm will benefit from a rising equity market.
Henderson
A strong active fund performance track record will help Henderson buck the trend towards passive management. It offers a credible multi-asset product. It will also benefit from rising equity markets. In addition, the firm is unlikely to face the same pressure on fees as its competitor, with flows continuing into higher-margin segments of the group.
The losers
Jupiter
Jupiter risks falling revenue margins, poor fund performance and a consequent risk to fund flows. It also has just 2% of assets under management in the key area of multi-asset funds. However, the firm's equity bias is likely to help it in a rising market.
Hargreaves Lansdown
The platform giant is among the firms facing the steepest decline in fee revenue, particularly for the costly Vantage platform. The firm is unlikely to benefit as much as St James Place from increased demand for pensions advice, as the bulk of the business is self-directed.
Asset Managers by AUM Growth
Management Fee Margins by Fund Manager
