James Dalby, who has recently taken up the role of market intelligence manager at the life, pensions and investments giant, said the ban on rebates should force platforms to compete on servicing and platform pricing, rather than focusing attention on fund pricing.
Mr Dalby said larger platforms will inevitably believe they should have access to better pricing than smaller peers due to their scale, but he warned that facilitating discounts on the basis of buying power would also harm competition by making it difficult for new entrants.
He said: “If they don’t get sensible pricing from fund groups then it is a non-starter. The regulator will be very keen to see how that turns out. The Financial Conduct Authority has a more interventionist approach and we see them doing more surveys.
“Fund groups should compete between themselves but should have a price for a particular fund on platforms and not differentiate between the platforms so it is a level playing field from a fund cost perspective.”
Most fund groups have refused to disclose whether or not they will facilitate unique share classes for larger platforms. Fidelity broke ranks last month by revealing to FTAdviser that it has “no plans” to introduce new share classes.
The move to ‘clean’ share classes follows the recent HMRC ruling on rebates, which heightened adviser demand for access to clean share classes in order to avoid pernicious income tax consequences of cash or unit rebates used to facilitate discounts.
Mr Dalby said that the 80+ fund groups in the market will still be making up their minds about what to do in terms of ‘superclean’ share classes, with arguments raging between larger platforms that want to exercise their buying power and wraps that demand access to the cheapest share class.
Mr Dalby said: “The problem with proliferation about share prices is it costs fund groups so much money to provide multiple versions of the same fund when you want to create a new share class and we are talking hundreds of pounds - set up costs plus plus other costs so it doesn’t make a lot of sense.
“Pre-RDR the AMC of an actively managed equity fund would cost 150bps and post-RDR ‘clean’ share classes will cost 75bps, which is the revenue to the fund provider. ‘Superclean’ versions of that could be 65bps.