Netwealth will charge fund managers $2000 for each fee rebate arrangement, saying its costs of administering them have gone up.
The platform business allows fund managers to offer fee discounts to financial advisers, licensees or managed accounts providers, which are processed as fee rebates. So far, Netwealth did not charge fund managers a fee for this.
But this month, the platform sent updated contracts to fund managers saying they will now have to pay an administration fee of $2000 plus GST per individual rebate arrangement per year.
Netwealth said it "appreciate[d] the current economic and financial impacts many businesses are currently facing" and therefore will charge $1000 plus GST for FY21, after which it will go to $2000 plus GST per rebate agreement from next financial year.
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As an example, a fund manager offering fee rebates on one fund to 10 advisers, licensees or managed accounts providers will end up paying $20,000 to Netwealth in rebate admin fee. The cost adds up if the manager offers multiple strategies.
Netwealth managing director Matt Heine said the company typically doesn't discuss commercial agreements but confirmed the new fee applied all across the board.
"The fee is for administration. It is not based on FUM, it is the same for all managers and it seeks to recover the significant overhead that we incur processing rebates arrangements back to the client," he said via email.
"Rebate administration is time consuming, complex and is not offered by all platforms for this reason. It is something we believe is valuable for our clients and therefore offer as a service to managers."
"To process client rebates resources are required to implement and contract, maintain the arrang[e]ment, calculate and invoice quarterly and allocate the rebates to eligible investors platform cash accounts;
"Clients get the benefit which is great, but equally managers also receive a commercial benefit by Netwealth administering the fee. The alternative for managers is to issue another unit class that is costly."
As an alternative, Netwealth's Investor Rewards program, which is admin fee free, allows fund managers to rebate 0.10% pa every Netwealth account holder who invests in a participating fund.
He also declined to comment on how many fund managers offer fee rebates via Netwealth, or total revenue from the new fee.
"As we are listed I unfortunately cannot provide revenue information that has not been shared with the market but as mentioned the administration fee is seeking to recover costs associated with the management and processing of the client rebates," he said.
The new rebate fee comes at a time when Netwealth is understood to have raised the fees for fund manager to host their funds on its platform from $7700 per fund to $10,000 in recent months.
A funds management executive, who did not want to be named, said Netwealth has professed customisation to their clients, of which rebates are a part.
"I feel like I am subsidising their business model [by paying the rebate fees]," they said.
"At this stage, fees are such a sensitive issue...I think fee discussions with financial planners and clients are also very sensitive.
"We will absorb them for now...If the market wants customisation, I will [have to] start to discuss sharing that burden with financial planners."