This morning (23 September) just before nine o’clock an email plopped into my inbox from Investec, announcing the launch of ‘superclean’ share classes.
But hold on a minute, Investec Asset Management is a fund group, not a platform. I thought these stupendously clean share classes were the result of hardball negotiations by larger platforms using their buying power to facilitate the same discounts investors were set to lose under the move to ‘clean’ shares being enforced by the regulator.
Why is Investec now volunteering this? And what does it say about the increasingly arcane terminology that has clouded what was once a fairly clear differentiation?
Investec’s superclean rate is an annual management charge of 65 basis points, which will be available on the three funds in its Managed Solutions range, selected funds within its Specialist fund range including the UK Special Situations fund, and the Diversified Growth fund and the Diversified Income fund.
That’s not a negotiated price, that’s a listed price that will be available to “selected strategic distribution partners”. I wonder if this means “all platforms”, because otherwise the firm will surely be blacklisted by those firms not on this ‘selected’ list that must offer a less attractive rate.
If that is the case, then this is meaningless marketing puff that has further devalued attempts to make the industry more transparent and easier to understand. If it’s not, I still think this will only serve to confuse matters further.
First we had bundled. Then the regulator wanted more explicit pricing so to give it the best spin companies began using the term ‘clean’ to describe transparently-priced, unbundled share classes. Fair enough.
But competition courses hot through the veins of the financial services industry and it wasn’t long after HMRC dropped the tax bomb on rebates that Standard Life coined a new term in an effort to be seen going that one step further.
The firm announced it would not only unbundle its pricing but where rebates were available it would negotiate with fund groups for their own bespoke rate, with these new share classes being termed ‘superclean’. We’re expecting details on the deals they’ve agreed soon.
Aside from the acrimony this caused among smaller platforms that will not have the buying power, I’ve never been sure the term is accurate and at worst I worry it is misleading.
We’ve already had the confusion of Skandia launching clean share classes with rebates - a misnomer if ever I heard one; now we’re going to have share classes that will imply a greater level of transparency when in fact they are simply a reflection of the power of one firm’s elbow over anothers.
Cheaper deals for customers is obviously to be welcomed, but if the whole point of the regulator’s intervention was transparency this is in danger of being lost along the way. M&G, for example, told FTAdviser it was not planning to implement superclean because they are simply too complex for advisers who were already wrestling with the Retail Distribution Review.
To be ‘clean’ means to be unbundled and rebate-free. But ‘superclean’ share classes aren’t more rebate-free. They’re not more unbundled or more transparent. Cheaper rates are nice but the term ‘clean’ doesn’t refer to rates. It refers to honesty.
Investec has not returned my calls but surely this use of the term superclean is now totally severed from the original meaning of clean. This doesn’t refer to unbundling, it doesn’t refer to rebates and it isn’t even a bespoke negotiated rate. This is just tiered pricing.
I hope this doesn’t herald the start of companies applying the term superclean to any discounted rate or even to their own existing rates as a synonym for ‘cheap’, in the way every product is ‘market-leading’ in a company’s own press releases.