The chief executive of investment platform Novia said the move by the taxman would spell “the end of unit and case rebates” for investors and therefore “there really is no need for rebates in the future”.
Mr Vasilieff said the HMRC announcement should herald the introduction of simplicity, transparency and clean share classes. He added: “The argument for unit rebates is that a mechanism is required to create competition and therefore a rebate of some sort is required to allow fund managers to discount their price.
“Experience to date, however, has shown that any excess rebate has gone into the pocket of distributors, not investors.
“We appear to be heading into a situation where retail investors could end up purchasing expensive share classes and getting rebates, part in units and part in cash. They haven’t got a hope of working out what is going on, and who can blame them?”
“The FCA will ban cash rebates but allow unit rebates, but I don’t think there will be any interest in them anyway. The big issue for me is legacy business – it is a source of income for a lot of advisers, and we need clarity on it.”
Mr Vasilieff added that increased competition among fund managers and increasing penetration of passive investments would force down prices, as fund managers had to earn their active management premium.
Steve Moseley, founder and senior partner of Derbyshire-based Sterling McCall, said: “Whether this was HMRC’s decision or not, I think it’s about time we moved to clean unit classes, and I’m happy about the move. My only concern is that new unit prices could become more expensive if fund managers remove the rebate and don’t pass on those savings to the clients.”
| Background |
In March, the HMRC announced that any rebates handed to clients from 6 April were deemed to be annual payments and therefore counted towards taxable income. Historically investors have not declared their rebates as taxable income. The FCA is yet to decide on final rules on platform remuneration and any potential ban on platform rebates. A spokesman said it expected to report back with a judgement during April. |
