Platform fallout continues, interest-only worries abate

Mind the margin

While the FCA stated in the paper it would be watching out for fund managers cashing in on the rules by bumping up margins, Artemis admitted to FTAdviser that it is already taking a higher margin on some clean fee share classes. M&G conceded it’s six-year old clean fee share class is also more expensive than its bundled counterpart.

The news came out following a report published by FTAdviser revealed the total cost of investing for low-value clients through Cofunds had risen after it moved to unbundled shares. Cofunds new model means clients need to invest over £250,000 in order to fall below previous pricing levels.

It makes me wonder: before cross-subsidy became such a profane term in the eyes of the regulator, were lower-end investors simply shielded from the real cost of investing, or is what we’re seeing a reflection of financial services companies growing margins where they can?

Either way, in a regulatory environment where the government is increasingly broadcasting the importance of saving and the need for advice, this trend of rising prices for lower-end investors one might see “everyday” investors doing otherwise.

Muddying the ‘clean’ waters

Skandia threw a spanner in the works of the new nomenclature this week when it announced the launch of “unbundled share classes with rebates”, as it argued that almost nine in 10 clients would be worse off with the absence of rebates.

What do we call these half-way house share classes? Instead of ‘superclean’, how about ‘pseudo-clean’?

Jibes aside, given the data relating to the cost of investing increasing and the lack of clarity on how superclean will work, in some respects they’ve stolen a march by claiming they can reduce costs for Isa and pension investors by up to 6bps.

Interest only

After Martin Wheatley called interest-only mortgages a “ticking time-bomb”, the mortgage sector’s eyes and ears were waiting to hear the results this week of the new-generation regulator’s review. As it turned out, this was a bit of a damp squib.

Despite all the hype, which I’ll admit I contributed to, the FCA simply revealed that actually nine out of 10 per cent of customers with such a mortgage have a repayment plan in place.

But don’t pop the corks just yet. The FCA also revealed that more than a third of borrowers with a loan maturing before 2022 could face a shortfall of more than £50,000, while close to half of all interest-only borrowers overall might be facing a shortfall.

Lenders are being required to speak to clients, who continue to bear the responsibility in the regulator’s eyes for arranging repayment. No ban and an outright rejection of claims of mis-selling was good news for the sector, even if it wasn’t for headline writers.

Credit where due

This week we saw the fifth credit union collapse in 2013, bringing the total payout from the Financial Services Compensation Scheme to £3.2m in the first four-and-a-bit months of this year alone.

Individually, each of these failures may not be big news. However, the steady stream of insolvencies has to make you wonder, how many more are going to fall in the next few months? Why is it all happening now? And what to make of the government’s recently-announced £38m cash injection to the sector?

Liberation isn’t free

Pension liberation schemes have been in the news recently, with FTAdviser reporting one alternative investment firm claimed not to be aware that investors could be charged with up to 70 per cent tax. The firm in question, Chase Goldman, removed the details of the pension liberation company following the story.