Skandia has hit out at platforms seeking to convert investors in bulk from bundled to unbundled share classes, warning such a move may be against the principles of treating customers fairly.
Platforms including Novia, Standard Life, Ascentric and Alliance Trust Savings have all indicated they will move to switch off trail commission and rebates to investors in the coming months by converting funds to ‘clean fee’ share classes, which do not pay kickbacks to advisers, platforms or clients.
The move has been prompted by the FCA’s ruling in April that platforms will have to stop accepting commissions from fund managers, which are currently bundled in to fund charges, and HMRC’s decision to tax rebates to clients.
But Skandia has announced that it will not be converting clients’ investments in bulk without prior permission from advisers. The platform said it was “already seeing a rapid natural transition” from bundled to unbundled pricing prompted by advisers rather than the platform itself.
Managing director Peter Mann said: “We anticipate that a very small percentage of our Isa and collective investment account business will be left in our charging structure by 2016. That date is more than two years away and it has never been our intention to expedite the movement of that book to an unbundled model before advisers are ready to do so.”
Mike Barrett, platform marketing specialist at Skandia, added that converting funds from bundled to unbundled share classes without input from advisers could put investors at a disadvantage.
“It seems strange that platforms are taking that decision and there is no alternative for advisers or customers,” he said.
Skandia’s comments follow criticism of bulk conversions by Axa Wealth’s David Thompson, managing director of the group’s Elevate platform, who argued that cost differences between different share classes could disadvantage some clients, while other funds are yet to launch unbundled shares.
Pension and bond wrappers are not affected by the FCA’s rule changes. Such products can continue to pay commission even if the underlying investments change - commission will only cease if the wrapper itself is changed. However, the FCA is expected to consult on expanding its RDR commission ban to these areas.
