‘Clean’ share class assets on platforms leap up
The amount of money now invested in so-called ‘clean’ share classes has taken a big leap forward roughly a year ahead of the regulator’s sunset clause.
The implementation of the RDR heralded a ban on trail commission paid to advisers as well as payments from fund managers to platforms, which had previously been ‘bundled’ into the price of funds.
Platforms in April last year were banned from retaining these payments from funds bought after the implementation of the RDR. In April 2016, this ban will be extended to funds bought before December 31 2012.
Fund groups have, since the RDR, launched what have become known as ‘clean’ share classes, free of platform rebates and adviser trail commission.
Advisers with clients in ‘bundled’ share classes have largely had to start moving them into non-commission-paying share classes. A caveat to this is that rebates can still be paid by platforms to clients in the form of units, but not cash.
Research by Investment Adviser in May last year showed roughly 50 per cent of platform assets were in clean share classes, but updated figures show there has since been a surge to roughly 75 per cent.
The research encompassed 11 major platforms, with fund supermarket Fidelity FundsNetwork declining requests for data.
Cofunds, the UK’s largest adviser platform by assets, is lagging the pack with 60 per cent of its £64bn of assets under administration in unbundled share classes. But the move is a big improvement on its 30 per cent when the research was last conducted.
Old Mutual Wealth appears to have made the largest leap in terms of assets in clean shares since May 2014.
Back then, just 9 per cent of its assets under administration were in clean share classes, but that figure has now rocketed to 64 per cent of its £30.8bn of assets.
Michael Barrett, investment platform expert at Old Mutual Wealth, said: “We recently carried out a share class conversion process for clients in our unbundled platform charging structure to unbundled share classes, provided the customer is not disadvantaged.
“We are taking responsibility for notifying customers of the changes and ensuring they are invested in the best value share class available through Old Mutual Wealth.”
He added its recently launched WealthSelect service only used unbundled share classes.
Ian Taylor, chief executive at wrap platform Transact, said many of the share classes on his platform had been ‘clean’ already, such as from fund groups Vanguard and Dimensional. He said these companies had never charged fees high enough to pay rebates to the fund supermarkets so had always been ‘clean’.
He added that rebates paid in units into the client’s account had not been banned under the RDR, so while £4bn of assets had been converted into ‘clean’ share classes on his platform, roughly £1.5bn of assets still paid rebates and would “not need to be converted ever”.
