estment
oFFiCe | Coutts
These fee trends, which started in the institutional market, have certainly spilled over and helped the retail investor but institutional fee transparency remains far greater, as does awareness of its importance. Just as powerful in bringing change to the retail investment market has been the role of innovators who have built new business models to ‘solve’ for a lower fee future. In the UK, one of the best known and market leader in discretionary portfolio management is Nutmeg but even their headline fee (which falls to 30bps for savings of over £500,000) is expensive compared with Betterment in the US where their headline fee is 15bps for assets over $100,000. In an increasingly global market, price pressures are crossing continents and can now be seen, albeit slowly, adding to the headaches of bankers in both Zurich and Singapore. There is no reason not to expect best practice to migrate in a global market but the pace of change may still be quite slow if those benefitting from the status quo are effective in its defence. Lobbyists such as the Edition #4
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Transparency Task Force as well as the FCA have a critical role to play in sustaining the pace of change in London. Finally, the retail investors themselves are changing and are expecting something more aligned with their other retail experiences. The investment industry is taking tentative steps to address the under 40 generation, for example via the development of the robo-advice model. But this still feels more about being a platform for delivery and preserving profit margins, rather than a move to reduce fees to match a low return environment. For many, a key component of their retail experience is simple, instant price comparison- whether that is for insurance and mortgages, or the ability to walk in a shop in Covent
Garden, find a better price on-line from a warehouse in north Wales and expect and receive a matching discount. This generation has also observed the 2008 credit crash and probably watched ‘The Big Short’, neither of which encourage people to be either impressed by, or trusting of, the financial services industry. But while they do not trust financial services, it does not mean that they are equipped with the knowledge to be smart in navigating the web of complexity spun by the industry. Try putting yourself in the shoes of a novice investor, and then navigate on-line from DIY platforms talking about platform charges, to
August 2016 | www.transparencytaskforce.org | The Transparency Times
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