The banning of fund managers' rebates on new investments this month will intensify price competition between platforms, making investing cheaper for DIY investors, experts believe.
Online platforms have introduced "clean share classes", which have effectively unbundled rebates from management fees, making the cost of investing more transparent.
As a result, adviser firm Chase de Vere estimates that within two years, average fund management fees will fall from around 0.75 per cent to more like 0.60 per cent. "Fees have fallen, but there is still some extra fat to come off them," said Patrick Connolly, financial planner at Chase de Vere.
Chase de Vere is also warning investors to choose their platforms carefully on pricing and functionality, because increased competition could mean the number of platforms reducing to around 10 or 15, as the rest bite the dust.
Andrew Power, insurance partner at Deloitte, said: "Providers have already been quick to cut fees resulting in reduced margins, and consumers will benefit from transparent charges. If platforms are to survive they must quickly attract more assets or offer consumers managed investment portfolios for which they can charge an additional fee."
Despite having an overall positive benefit for investors, the new fees are causing more confusion about costs, according to Richard Bradley, a senior researcher at The Platforum.
He said: "The new rules on platforms that came into effect on 6 April 2014 have certainly made the market more transparent, with the confusing and opaque payments from fund managers to platforms no longer permitted.
"However, we're now in an equally confusing situation, where platforms operate different charging models and some funds are available on different platforms at different prices, making it difficult for investors to compare the total cost of owning a fund."
The cost of investing with popular online brokers
| DIY Platform | Portfolio size | |||
| £10,000 | £50,000 | £150,000 | £500,000 | |
| AJ Bell Youinvest | £121 | £654 | £1,662 | £2,695 |
| Alliance Trust Savings | £206 | £790 | £1,598 | £2,407 |
| AXA Self Investor | £116 | na | na | na |
| Barclays Stockbrokers | £116 | £579 | £1,737 | £3,178 |
| Bestinvest | £121 | £579 | £1,738 | £3,608 |
| Charles Stanley Direct | £104 | £642 | £1,685 | £2,928 |
| Chelsea Financial Services | £141 | na | na | na |
| Fidelity | £116 | £579 | £1,737 | na |
| Halifax Share Dealing | £143 | £632 | £1,530 | £2,338 |
| Hargreaves Lansdown | £121 | £605 | £1,815 | £3,285 |
| Interactive Investor | £161 | £648 | £1,456 | £2,265 |
| TD Direct Investing | £113 | £713 | £1,928 | £3,115 |
| The Share Centre | £218 | £902 | £1,710 | £2,518 |
| Source: The Platforum, as at 2 April 2014 | ||||
