Response letter to Alan Kohler's article "Platforms Must be Scrutinised"(SMH 18-19 March 2006

20 March 2006

The Sydney Morning Herald, The Age and the West Australian on 18 March 2006 published an article by Alan Kohler titled "Platforms Must Be Scrutinsed"

The article suggests that all platforms are the same and that their main purpose is to "extract an average of 2 per cent in fees".

The Head of Macquarie Adviser Services, Neil Roderick, sent this letter to the SMH, The Age and the West Australian to answer Mr Kohler's claims.

Dear Sir,

While I agree with your columnist Alan Kohler, (Platforms Must be Scrutinised SMH 18-19/03/2006) that platforms are quite useful and do make life easier, he should familiarise himself with the situation in the investment platform world before suggesting that platforms and advisers have formed a cartel - something that is illegal in Australia.

Mr Kohler's broad-brush approach has also failed to discriminate between master trusts and wrap platforms and his sweeping statements about fees and commissions fail to take into consideration that not every platform is the same.

Mr Kohler seems unaware that many leading wrap platforms in Australia do not charge commissions at all. Macquarie, BT and some Asgard products are in this category.

This facilitates a transparent fee for service rather than the traditional bundled commission structure of old world retail.

Mr Kohler will find that many industry participants have been advocating fee transparency for several years now and this advocacy has been supported by industry representative bodies like IFSA.

In the case of Macquarie Wrap, advisers are free to agree their own level of fees with each client.

The wrap administration fee, itself, is the subject of robust negotiation between the adviser dealer groups and the provider and due to a combination of an increasingly competitive market and increasing business levels, has steadily decreased during the past five or six years to levels well below the 1 per cent quoted by Mr Kohler.

Advisers value their clients and are conscious of cost effectiveness and we have found this to be a vital component to us in winning new business during the past few years, as has fee transparency and functionality that benefits both client and adviser.

The shift in market share (based on quarterly inflow data as reported to Standard & Poors) in recent years, is such that wrap platforms provided by Macquarie and BT alone now account for more than $1.9 billion or 37 per cent of net inflows (Asgard's wrap product increase the percentage further still), and would suggest that advisers and their clients do not believe all platforms are the same.

Yours Sincerely

Neil Roderick
Head of Macquarie Adviser Services

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Macquarie Funds Management Group
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