Legg Mason to scrap trail commission

The changes, to affect both retail and institutional investors, will see the annual management charge for class A shares fall by 40 to 45 basis points for the firm’s fixed income funds and by 50 basis points for its equity funds.

An initial charge for subscriptions will also no longer apply.

Adam Gent, Legg Mason’s head of UK sales, said: “With the advent of the RDR sunset clause, we have taken the decision to review fees because we believe that it is the best thing to do for our clients.”

Legg Mason is not the first to announce changes to off-platform charges in anticipation of the sunset clause, which will put a stop to legacy commission payments on platform business from April.

In December Standard Life Investments (SLI) announced it would end trail commission paid to advisers from its UK retail funds as of March 31 2016, in order to create more “consistency” for clients regardless of when they had made an investment.

The halting of these commission payments, equating to around 25 basis points for bond funds and 50 basis points for equity funds, mean ongoing charges for clients invested in SLI’s legacy retail share classes will fall, typically by between 20 and 30 basis points.

SLI attracted criticism, however, for not cutting fees in line with the amount it had been paying out in trail. The fund house said the move was to ensure consistency between share classes.

A spokesman for Legg Mason said the group’s fee cuts represented the full trail amounts.

Elsewhere, the Investment Association last month called for a “renewed dialogue” with the FCA over a potential sunset clause for trail commission.

The trade body used its initial response to the FCA’s asset management market study to restate the case for a move away from all legacy payments, citing concerns about the co-existence of bundled and unbundled share classes.

In its comments to the FCA’s terms of reference, the IA said: “It has not been possible to date to agree with regulators a framework under which fund management companies could act systematically to faciliate the movement of end investors into post-RDR share classes. The reasons for this relate to a number of complexities of the retail distribution chain as well as legalities of unit ownership.

“The IA would welcome a renewed dialogue with regulators to facilitate a process of transition.”