PlatformsDec 1 2014

Third of adviser platform purchases use ‘bundled’ charges

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Close to a third of funds added to advised client platform portfolios in 2014 in the past eight months have been through rebate-paying share classes, suggesting that despite a push to convert clients to ‘clean’ many are still finding ‘bundled’ alternatives are cheaper.

The data, based on nearly 56,000 fund purchases tracked through 29,000 portfolios analysed by AdviserAsset since April, found 32 per cent of all funds added to portfolios were in the form of rebated share classes.

According to Colin Turton, director of AdviserAsset, in half of these purchases - representing around one in six of the total - the advisers has specifically selected that clean substitutes will not be considered for conversion.

Since April bundled share classes have only been able to rebate in fund units and only a small number of platforms continue to offer them, potentially giving them a competitive advantage. Old Mutual, FundsNetwork, Transact, Nucleus and James Hay are among those that have not bulk converted to clean.

The data reveals that clean pricing has not caught up with the desire for transparency. Data published by FTAdviser last week revealed that only 4 per cent of advisers prefer ‘bundled’ share classes, with 40 per cent preferring standard clean shares which can be re-registered easily.

Mr Turton stated this was not a surprise, as clean does not always mean lowest cost.

He added: “The real issue for platforms arises when advisers seek to consider which platforms can provide access to their investment portfolios.

“Obviously, platforms need to be able to provide access to all the funds in any given portfolio to be considered as a potential client solution. It only takes one fund in a portfolio to not be available via a particular platform to exclude that platform from consideration.

“At the moment, looking at this situation in isolation, it is favouring those platforms that offer advisers the choice of unit rebates such as Old Mutual, Funds Network, Transact, Nucleus and James Hay. This is only a small part of the current competitive landscape though.”

The latest data comes in stark contrast to Zurich’s original figure that less than one in twenty advisers would opt for ‘bundled’ share classes.

It revealed that around four in ten intermediaries preferred straightforward ‘clean’ share classes to be offered by fund managers to all platforms. Around a quarter said they preferred the preferential superclean shares, which are offered to particular platforms and are often around 10 to 30 basis points lower.

The research also found that close to half of advisers did not think it was positive for transparency that the industry is offering differently priced share classes for the same products.

ruth.gillbe@ft.com