PlatformsMay 20 2013

FCA ‘guilty’ of driving advisers to guided architecture

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ByMatthew Jeynes

The FCA is driving advisers towards multi-manager funds and guided architecture, according to Holly Mackay, managing director of The Platforum.

Speaking at the Morningstar Investment Conference, Ms Mackay said increased regulation and the FCA’s insistence that advisers put together a “robust, repeatable process” meant that a rising number of client propositions were being pushed towards guided architecture.

Graham Bentley, managing director of Graham Bentley Investment Intelligence, said more platforms were taking advantage of this shift in the industry by launching guided architecture models. He said that platforms could use these structures to guide fund flows and negotiate cheaper prices with fund managers.

Mr Bentley said the benefit to platforms of introducing guided architecture – such as Hargreaves Lansdown’s Wealth 150 and Skandia’s Select List – was that if fund managers thought they would be part of it, they “might provide headroom” on prices because they would get flows directed.

Ian Taylor, chief executive of Transact, said that in the debate about ‘super-clean’ bespoke share classes and whether platforms could force fund groups to offer lower prices, the platforms had taken on a role they shouldn’t have.

He said: “Advisers are the custodians of their clients’ money, but one problem that has developed is that some platforms think they control the money.”

In a related topic, Tom Sheridan, chief executive officer of Seven Investment Management, said that some fund managers were acting as “villains” by keeping their charges high or even raising them.

“In the drive from bundled retail share classes to clean share classes, some fund managers got smart and tried to put their annual charge up to 90 basis points,” he said. “The villains are the fund managers that are still trying to charge substantially more.”