Over four in ten (42%) IFAs predict that total fees – including investment management charges - will fall over the next half decade but a third (32%) think they will increase and a quarter (24%) believe they will stay the same.
Opinion is similarly divided on fees charged by Discretionary Fund Managers : the majority of advisers (53%) predict that DFMs will cut their charges but 45% think they will increase or stay the same.
The study suggests that fewer IFAs expect DFMs offering a bespoke portfolio management service to reduce fees than those offering model portfolios: 60% of advisers predict bespoke DFMs will either increase their fees or freeze them while 37% of advisers believe they will reduce them.
According to the study, three-quarters (74%) of IFAs believe that DFMs offering bespoke portfolio services are justified in charging higher fees than those offering model-based solutions, given the additional resources and complexity involved in providing this.
Advisers predict that the popularity of bespoke DFMs among their clients will remain strong with 71% forecasting demand will either increase or stay the same over the next five years.
A key reason for the continued demand for bespoke DFMs is the widespread expectation that challenging market conditions lie ahead. The majority (51%) of IFAs believe that investment returns will be more difficult to generate over the next five years, over a third (37%) believes returns will be similar and just 3% think they will be easier.
Mark Stevens, Head of Intermediary Services, Investec Wealth & Investment, said:
“Advisers are divided on what will happen to all types of fees but when it comes to investment markets, they are far more united in their belief that conditions will either remain similar or become even more difficult.
“In this environment, advisers recognise the additional value offered by bespoke DFMs and appreciate that this level of service is likely to cost more. However, given the continued strong demand for bespoke DFMs from investors, it’s clear that many clients have no qualms about paying for a quality investment management service and professional advice. A positive outcome for clients, their IFAs and DFMs.”
