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Brewin Dolphin changes structure and reduces fees in its Managed Portfolio Service

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Wealth manager Brewin Dolphin has announced that it will reduce the cost of its Managed Portfolio Service (MPS) by changing its structure to make it more efficient and scalable. The enhancements will take effect as part of a phased transfer between February and May 2018.

In future, for the transferring assets, Brewin Dolphin’s MPS will invest directly with chosen third party managers via segregated mandates instead of via their retail funds. Brewin Dolphin explains that it is leveraging its economies of scale to reduce the third-party manager charges, and pass that benefit on to the advisers’ underlying clients. The firm estimates that this will give rise to a GBP3 million cost saving to underlying clients as the cost of investing drops.

Brewin Dolphin will pass on all cost savings to advisers’ clients as the new approach will reduce the Ongoing Charges Figure (OCF) of the underlying fund holdings.

It gives, as an example, the fact that the indicative underlying cost on a balanced MPS portfolio will fall by some 17 per cent from the current cost at 62 basis points (bps) to 52 bps afterwards. The enhancement to the service will lead to client cost savings of around GBP3 million each year in aggregate, the firm says.

Additionally, transaction costs should decrease due to the lower portfolio turnover, the firm says. If Brewin Dolphin decides to change a manager, there is no need to sell down and reinvest the proceeds in a new fund. The management of the assets within the funds can be taken up by a new manager.

The structure has also been created so that as scale builds in the service, Brewin Dolphin says further savings are possible and will be passed on to the underlying clients. This ensures that clients are the beneficiaries of savings now and in the future, the firm says. Brewin Dolphin will take no fee from the new manager of manager funds but will continue to be remunerated for the service at the same level, currently 0.30 per cent+VAT.

Robin Beer, managing director of investment solutions and distribution at Brewin Dolphin says: “Brewin Dolphin’s MPS has reached a scale where our advisers’ clients can benefit from the reduced fees associated with large mandates rather than pooled retail funds. We’ve had this structure in our minds for a few years now, and once the assets rose to a level that would be attractive to third party managers, we’ve implemented it.

“As well as reducing the cost to our advisers’ clients, the new operational structure will ensure our investment decisions can continue to be implemented efficiently.

“Our intermediary business has gone from strength to strength over recent years and that’s a testament to a number of factors, including our network of business development managers around the country, our fantastic relationships with advisers and platforms, and our expanding risk profiles used to assist advisers.

“We are committed to transparency and advisers will continue to see the exact percentages managed either via the segregated mandate or the other third-party funds used within the models.”

At the core of the new structure will be four new ‘manager of manager funds’ that will allocate a proportion of each fund across a number of third-party managers. Many of the managers already appear in the MPS models, but Brewin Dolphin is planning to bring some new names on board.

Brewin Dolphin has appointed GBP200 billion advisory and fund administration provider Maitland as the ACD (Authorised Corporate Director) and fund administrator for the new funds which will provide UK Equity, UK Equity Income, North American Equity, and Global Bond strategies across the four separate funds. The funds are approved by the FCA and will launch in February 2018.

Brewin Dolphin writes that a carefully orchestrated transition plan will see MPS assets transfer into the new structure between February and May 2018, using the normal monthly re-balancing schedule. The funds will be available on all 11 fund platforms currently offering the MPS service.

Approximately 40 per cent of the remaining MPS assets (some overseas equities, property and absolute return) are unchanged and will continue to invest in third party retail funds.
The firm writes that there is no change to the investment process that has driven its MPS. Brewin Dolphin’s in-house research department still provides the relevant oversight while Brewin Dolphin’s Asset Allocation Committee will continue to meet monthly and set the asset allocation for the models. The re-balancing of the five portfolios will continue monthly across all platforms.

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