Fund managers have settled in for a long wait before the Investment Management Association agrees an approach to ensure consistency in comparison between bundled and unbundled share classes, which could now come up to a full year after new platform rules came into force in April.
At the end of last year, the IMA said it was holding back on finalising its approach to calculating individual fund and IMA sector average returns, stating that it was continuing to monitor changes emerging as a result of the ban on platform cash rebates and the end of bundled pricing.
At present, all performance statistics are based on bundled share class performance, typically at 1.5 per cent per annum for an equity fund. With platform fees and adviser commission stripped out, clean share price is now averaging at 0.75 per cent.
At the end of June the IMA published a consultation paper offering the choice of two methodologies: replace the existing commission-loaded primary share class with the highest charging post-RDR share class, or with the highest charging share class distributed via a fund platform.
The latter option, it said, would reflect the fact that the majority of retail distribution takes places through platforms. The consultation began on the 26 June and the organisation said “interested parties have until the end of August to respond.
Following the consultation there will be a transition period to ensure that data vendors can “conduct system development work and implement any of the other changes once a decision has been made”, a spokesperson for the IMA said.
This will likely push implementation into the first quarter of 2015, the spokesperson confirmed, marking close to a year since the new rules came into force but still 12 months ahead of the deadline for all legacy cash rebates to cease through platforms.
Gary Potter, co-head of F&C’s multi-manager team believes that although it would be good to get resolution on the matter soon, there is very little the industry can do but wait.
Mr Potter said: “I think its helpful if we have this resolved from the point of view of clarity in the market place. We are in a bit of an ‘out and shut’ position.
“It has to be done very clearly... another six months is unfortunate but I understand it has to be absolutely right. I want it done tomorrow but the reality is it has got to be right because people do buy, hold and sell based on numbers and we don’t want a disjointed market.
“If you think about the complexity of the number of share classes – getting all that to work correctly from old to new is a challenge. The industry will want full transparency on a like-for-like basis.
“The perils of having a system that’s fractious and not put together properly could lead to... more and more confusion.”
Rod Aldridge, head of UK wholesale distribution at Baring Asset Management agreed and added he felt the share class that should be used is “the primary share class”.
“I think there is a window when it [pricing comparison] needs to be addressed. I think in the intervening time, as long as people are comparing apples with apples then it’s OK.
“What would be very misleading would be if data providers started using different share classes for different fund groups, so I think as long as they keep consistency in terms of what they are comparing then it’s OK.
“We are still seeing even platforms taking different policies in terms of how clients move across, use clean share classes, and as we know people can still receive trail commission on retail classes until April 2016... As long as people address this during this transition period it will be fine.”
Nicola Kembey, head of IMA sectors said: “We have facilitated discussions and opened this consultation to promote consistency and comparability of relevant performance data in a post-RDR environment.
“We encourage as many interested parties as possible, including financial advisers, platforms, data vendors and asset managers, to contribute to the consultation so we can capture a range of views to help the industry and the data vendors make a final decision.”
Data providers began emphasising in 2012 that the performance of bundled and unbundled share classes cannot be compared directly, which led to confusion over how fund performance figures would incorporate the switch to clean share classes.
In May 2012, FTAdviser reported how the new share classes would cause confusion amongst consumers.
At that time, director Michelle Cracknell said fund managers should concentrate on adapting institutional share classes as these are more flexible in terms of their annual management charges.
