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Home > Investments > Wraps & Platforms

Platform View: Clean-fee is becoming a reality

Cofunds sales and marketing director Alastair Conway discusses ‘clean fee’ shares as RDR implementation deadline looms.

By Alastair Conway | Published Aug 13, 2012 | comments

There was a time, way back in the day before all conversations led inexorably to RDR, that I would have staked my life on there being a finite number of analogies and puns about countdowns and ticking clocks that could start a blog or article.

It turns out I was wrong.

So for the sake of my own sanity I want to look beyond the implementation deadline to a fully functioning, bedded-in RDR world where unbundled pricing is the norm and the benefit of transparent, clean share classes is settling into the consciousness of end investors.

In this future reality - as identified by the Deloitte research that informed the direction/decisions of consultation paper 12/12 - the introduction of discrete charges across the value chain has brought about individual markets for advice, fund managers and platforms. The result, hopefully, is a shift away from a preoccupation with knowing the price of a service without an appreciation of its value.

The decision to support clean share classes is also future-proofing our business. In its latest platform consultation, the FSA confirmed intentions to ban cash rebates between fund providers and platforms from 2014 and while the CP12/12 recommendations have their flaws (the confusing retention of unit rebates; exclusion of insured funds from the proposals) the message is clear: life is going to be easiest for those platforms, advisers and fund managers who embrace pricing in its simplest form.

This is an essential step towards enabling people to accurately assess the value of the service they are receiving. If you believe in the value of the service you provide, as we do, then you’ll have nothing to fear from justifying the explicit charge.

For the adviser, who has the relationship with the investor, evidencing his or her value should be relatively simple and help is on hand with an abundance of targeted MI available through platforms. I should hold my hands up here and say that while we unequivocally support clean, transparent pricing we nevertheless recognise that adviser firms should be able to transition clients to this new world at their own pace. So we’ll enable both ‘new’ commission-free and ‘legacy’ commission-included share classes to be supported on platform simultaneously until January. Plus we will continue to give advisers complete flexibility to choose how, when and if they disturb a client’s existing portfolio and move it to the new pricing world.

For platforms it will be a case of looking at the adviser-branded tools and services we can provide to advisers to help them engage with their clients.

For some fund groups the move to clean share classes has simply involved repurposing their institutional share class, even so for all, it’s demonstrated a real support for (or at least a real acceptance of) simple, transparent charging. When we stated our intention a year ago to champion clean share classes, we met with some scepticism. The idea of a retail share class that solely covers the cost of fund management seemed radical even a few short months ago. But a year on, it’s fast becoming a reality. The emergence of markets across the value chain is a good starting point for making the market more investor-friendly. And that, after all, is what all this counting down is all about.

Alastair Conway is sales and marketing director at Cofunds

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