A demand to end confusion about the meaning of share classes comes from Alistair Wilson, head of retail platform strategy at global insurer Zurich.
He claimed research findings among 230 advisory firms by Zurich this September showed “What one provider refers to as a clean share class may represent a bundled one for another, which may result in unexpected tax liability for clients.”
Mr Wilson said this could arise where a share class is described as ‘clean’ when it includes rebated commission. “To me that is not clean,” he adds. “And if it is not contained in a pension or Isa wrapper a tax charge could arise for higher rate taxpayers.”
This confirms the view that the lack of consistency resulting from the arrival of new share classes on the market in the past year has caused problems with re-registration.
The research showed 85 per cent of advisers said more consistency was needed in share class names. Also, 70 per cent said they would welcome the introduction of a designated ‘platform’ share class on to all investment platforms, even if it is not the cheapest option.
Zurich claims the fact that advisers are prepared to pay more shows the level of challenges currently affecting clients’ ability to move assets between platforms.
Mr Wilson said: “These findings show that work still needs to be done to simplify how we refer to share classes and make it consistent for everyone involved – fund managers, providers and advisers.”
Adviser view:
James Priday, director of Exeter-based Prydis Wealth and direct-to-consumer investment platform Strawberry, agreed that share classes need clarification.
He said: “Some providers use terms such as ‘no trail’, or ‘institutional’. Clients often have no idea what ‘trail’ means. Sometimes ‘retail’ and institutional’ mean the same thing. The bottom line is that this should have been clarified by agreement between all parties from the beginning.”
