Three of the UK’s biggest wrap platforms have slammed efforts by major platforms to secure super-cheap fund share classes for exclusive distribution by themselves.
Nucleus, Transact and Novia said they believed fund providers were already “running scared” of striking deals with specific platforms to offer cheaper share classes, for fear of alienating other distributors such as themselves.
Some fund providers have also expressed concern at the potential expense of launching another slew of additional share classes across their fund ranges, the wraps said.
HM Revenue & Customs last month announced it would tax any rebates passed from funds to investors, leading both Skandia and Standard Life to start negotiating with fund managers about the launch of bespoke super-cheap share classes that only they could offer.
These would be cheaper than those currently available as they would not include any amounts previously passed back by the platform to investors as rebates.
Bill Vasilieff, chief executive of Novia, said: “What will happen if one platform negotiates a different price? Other platforms which don’t get this price will just promote other things and fund managers will end up shooting themselves in the foot. They will alienate other platforms.”
Mr Vasilieff added that many fund managers were unlikely to agree to bespoke share classes as “they do not want a multiplicity of share classes” to administer, particularly following the rolling out of commission-free shares to comply with the RDR.
David Ferguson, Nucleus chief executive, agreed that fund managers would find it “quite difficult” to restrict a price to one platform.
He said it “felt like the old world” in terms of pricing deals between platforms and fund managers, rather than a focus on advisers and investors as the clients.
“Platforms would do better investing their energy into improving the market,” he added.
Malcolm Murray, head of marketing at Transact, said: “Fund managers will come under enormous pressure. As I understand it none of the fund managers I have spoken to are very excited about doing this.”
David Moffat, group executive of IFDS and chair of the Tax-Incentivised Savings Association’s wrap and platform council, said it would be “extremely difficult” for fund managers to launch share classes for individual platforms.
“Fund managers are running scared of this idea, they see it as a race to the bottom which they can only lose,” Mr Moffat said.
“They will have to give some ground but there is no reason why they should be able to hold out against providing a cheaper share class to other platforms. This [bespoke share class] will just become the new standard.”
