Pressure on asset managers and intermediaries to minimize fees and get them out in the open has arguably never been greater.
But as the conditional ban on commission contained in the EU directive MIFID II is transposed into Danish law, and interest in expensive alternatives funds increases, the battle is far from over.
On 1 July this year, the new ban on commission from investment funds within discretionary portfolio management services is coming into force in Denmark.
In its interpretative guidance, the Danish Financial Supervisory Authority (FSA) has clarified – among other things – that the ban does not apply to investment products sold on an execution-only basis, or after investment advice is given.
Denmark's biggest bank Danske Bank has already announced that customers using its discretionary portfolio management service will still pay the same fee they did before, but that a third of this will be invoiced to them instead.
It will then be paid directly through the deposit they hold, rather than through commission the bank receives from the third-party investment fund managers.
"I think transparency will be better with this approach, because a third of the costs will be more visible to retail investors," says Rune Wagenitz Sørensen, director and founder of wealth management firm Miranova.
But Denmark's third largest bank, Jyske Bank, has recently come up with a way of avoiding the direct levying of charges to asset management customers.
Is it fear?
Banks may fear that charging clients directly could push some of them away.
Jyske Bank is offering a service which puts a customer's savings into a fund which then invests in other funds, allowing commission to be paid – which is allowed under the new regulations because the structure constitutes an advisory service rather than discretionary portfolio management.
While Jyske Bank says the new arrangement meets the needs of customers, Wagenitz Sørensen describes it as "a step in the wrong direction" as far as transparency is concerned.
Allowing retail investors to see all the costs involved in fund investments remains a tough task, because of the layers of fees involved, particularly where funds are in effect investing in other pools of securities – such as a global equities fund that may include a proportion of exchange-traded funds (ETFs).
"It is very hard to explain, to show every cost and all the spreads," Wagenitz Sørensen says.
While the call for more transparency over fees continues, whether the overall cost of asset management for institutional investors is falling is debatable.
A recent survey by management consultancy Oliver Wyman and asset manager Morgan Stanley indicated that internationally, asset management fees may drop by around 10 percent by 2019.
"The challenge (for asset managers) is that the forces driving margin compression appear unlikely to abate," the firms said.
Fees for passive asset management products have fallen in general over the last few years, but research has shown that fees for some alternative assets funds – such as hedge funds and property funds – can still be expensive, and at a time when alternatives are sought after because of record-low bond yields.
"Asset classes in which investors can earn a complexity premium often allow managers to charge higher fees," says Casper Hammerich, principal at consultancy Kirstein.
"The cost of the most plain vanilla investments will increasingly be driven down – or internalized – to be able to pay the higher fees related to the more complex investments," he predicts.
For retail investors in Denmark, however, Wagenitz Sørensen sees no signs of lower overall fees from investment fund providers.
"Mutual fund companies might have lowered their fees for going in or out of the fund, but the total expense rate increases in this case, so overall, the cost is not going down," he says.