The final implementation of the requirements under MiFID II has still to occur in the Financial Intermediary Ordinance (FinVermV). Nevertheless, many financial intermediaries are already preparing today to secure their income for the future. This is increasing the focus on service fees. This is because in future service fees will not be regarded as payments under FinVermV. As a leading fund platform, Fondsdepot Bank has for decades assumed the calculation, settlement and booking of service fees for financial intermediaries.
The service fee is agreed individually between intermediaries and portfolio holders. Experience shows that the values are between 0.5% and 1.5% of the portfolio volume managed. Numerically, this produces an average value of 1.01% across all service fee agreements at Fondsdepot Bank. In the case of restructurings and purchases, the front-end loads are settled with the service fee and the financial intermediaries dispense with sales commissions.
The restructuring process is simple: Fondsdepot Bank provides financial intermediaries with a standard form for commissioning service fees. The intermediary also gets a form for paying the remuneration to the portfolio holder, dependent on the holding time.
Fondsdepot Bank takes 2.50 euros per portfolio per quarter per intermediary for the collection. No share of the service fee is demanded.
Sebastian Höft, Head of Business Partner Management at Fondsdepot Bank, expects further financial intermediaries to settle the service fees in future: "The service fee represents a calculable and permanent reference factor for financial intermediaries. Since service fees will also not be subject to MiFID II, their attractiveness will increase, especially also against the background of greater competitiveness through numerous service provided to banks. We have recorded growing demand since 2017 and expect a further push on this subject and are pleased we can already contribute many years of experience in the settlement of service fees."
Currently, over 30 major sales organisations with their intermediaries already use Fondsdepot Bank to collect their service fees. In the first quarter of 2019, the bank managed over 13,000 fund portfolios with filed service fee agreements. Given that there are over 270,000 fund portfolios overall, this is a topic that will inevitably become known to portfolio holders. Sebastian Höft is convinced that "many portfolio holders believe they are better off with the previous settlement models. However, anyone who is active and buys and exchanges many funds will definitely save on costs, since no more front-end loads are incurred. Overall, financial intermediaries will have to focus to an increased degree on service fees and pass on the advantages to portfolio holders. At any rate, we are in talks with other sales organisations."
