He says: “The rules now require that the different fees be broken out, and I think for some wealth managers that presents a problem, because the client would see the wealth manager outsourcing the picking of investment funds to a multi-manager and say to the wealth manager: 'why aren’t you doing that?'"
The ultimate decision to choose the merger option with Alliance Trust and persist with the multi-manager approach was, Ross says, “unanimous”.
Alliance Trust is about £3.5bn in size and also deploys the multi-manager approach, it is run by WTW.
Ross says: “On the point about costs of multi-manager funds, Alliance Witan is of a scale, and WTW are competitive enough, that the fee (0.60 per cent) is not much more than a client would pay for a global passive fund.
"And the other point is, because of the way WTW does it, they pick fund managers for Alliance Trust that may not have products available to UK retail or wholesale clients, so a wealth manager or adviser cannot replicate the portfolio. Those were compelling reasons."
Ross will become deputy chairman of the new combined company, while Dean Buckley, Alliance Trust's chairman, will become chairman of the combined entity.
Buckley says the new trust’s 0.60 per cent fee is cheaper than the 0.76 per cent previously charged.
He believes the reason Alliance Trust won the mandate is due to the performance in recent years, while adding that “there are always conversations around fees”.
Merging two companies incurs costs, and under the new fund management contract WTW have agreed to make a contribution towards these costs, rather than shareholders having to.
Buckley says the aim is to make the combined trust: “A one-stop shop for clients with smaller pots of assets. Clients can of course own passive, but Alliance Witan isn’t much more expensive than that now, and passive strategies are now quite concentrated around a small number of stocks.”
Running the combined Alliance Witan investment trust will be WTW’s largest UK fund management contract, and Buckley says he is in regular contact with WTW’s UK head and with Craig Baker, the global chief investment officer at WTW, who runs Alliance Trust.
Buckley says: “We have good negotiating power with the funds we invest in, because they negotiate not just as Alliance Trust, but as WTW and all of the other mandates they run, so can be competitive on price.”
