Italy’s IWBank cuts management fee repayment

IWBank, part of Italy’s UBI Banca, has modified the policy according to which it returns part of the management fee paid by clients when they hold a mutual fund.

The repayment is made on a quarterly basis in the form of a credit that goes onto the client’s account.

In 2011 and 2012, for a portfolio of more than €200k in mutual funds, IWBank offered back 33% of the management fees.

Before 2011, it operated a similar policy for mutual fund portfolios between €25k and €100k, and for portfolios between €100k and €200k, with credits of 20% and 25% of the management fees respectively.

Since the beginning of 2013, the firm now pays back 10% of the management fee for every size of portfolio in mutual funds.

Distributors have decided to follow the policy of returning part of the management fee, following the negative results posted by IWBank, with asset under management at about €0,5bn.

The Italian distribution network presents high barriers to entry for players interested in the market, mainly related to payment to access marketing plans.

IWBank, Fundstore (Banca Ifigest) and Online SIM (group Ersel) are examples of open architecture in the Italian market. They place respectively 4.100 funds from 91 fund managers, 4.700 funds from 130 fund managers and 3.000 funds from 120 fund managers.

Moreover they offer a discount of 100% on entrance and exit fees. Since 2011 they have also started to restrict the entrance of new Ucits into their platforms, due to technical and commercial costs to manage a periodic increase of new managing companies.

Moreover, retail clients don’t seem to be attracted to new foreign UCITS, which are still relatively unknown in the Italian market.

IWBank launched only 4 new fund managers in the last year, compared to 20/25 UCITS launched in 2009 and 2010. Companies that offer unit linked products, among which Skandia, did not reduce the new distribution agreements and represent the best solution for new fund managers.

Finally, some asset managers have been planning to list in the local stock exchange their Italian domiciled mutual funds and the listing of the first mutual fund on Borsa Italiana could be completed by the end of 2013.

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