Ian Sayers, the director general of the Association of Investment Companies, has said the industry’s move to ban rebates will finally put investment trusts on a level playing field with their open-ended counterparts.
Mr Sayers said the move to make platforms charge customers explicitly for their services rather than receiving rebates from fund groups was “great news” but added it had been a “long and winding road” to reach this point.
He also welcomed the fact rebates to consumers on new business would be banned from April next year, and that ‘legacy’ rebates would end by 2016.
Mr Sayers added the investment trust sector was probably the “best case” on why transparency alone never resolved the problem of commission bias and why transparency would not have resolved the problems of allowing product providers to pay for platforms.
“With commission also a thing of the past, customers will now see exactly what they are paying for advice, the platform and the fund,” Mr Sayers said.
“Products like investment companies, which are restricted in paying commission and platform charges, will be able to compete much more on their own merits.
“So, in the end, we have got to where we should be. One of the RDR’s lasting impacts is that customers should now be able to see exactly what they are paying for.”
The director general added research repeatedly showed that customers “tend to do poorly” when costs are bundled as they are unable to “shop around for the best price on each element”.
“It also makes consumers less likely to demand higher standards,” he said.
“If you perceive something as being ‘free’, you are much less likely to complain about what you are being offered than if you can see how much you are paying for it.”
