“On the other side of the equation it has been harder to pass these costs on to clients as institutions have become more cost-sensitive and the adviser industry has moved to consolidate and exploit the stronger buying power this brings,” he added.
Aldous also noted the impact that increased use of passive funds is having.
“McKinsey also highlight the ‘threat’ of passive investing and passive investment is definitely driving down fees in many parts of the industry,” he said. “Charles Stanley’s acquisition of Pan Asset in 2013 gave the firm critical mass in this area. Upgrading of the investment strategy committee and a renewing emphasis on both strategic and tactical asset allocation links in well with a higher use of passive investments. Using passives on their own is not enough though, asset management firms need to ensure that they exploit the efficiencies these investments bring by streamlining their teams and carrying less overhead.”
