Standard Life’s head of platforms proposition David Tiller has said there is no place for legacy business on platforms in a post-Retail Distribution Review world, as the platform announced that it is moving all clients to clean fee shares by January 2014.
Standard Life said in a statement that it is set to carry out a bulk conversion of all investments in bundled share classes to their unbundled clean equivalent, including ‘superclean’ shares where the platform has been able to negotiate a preferential rate.
It added that it is expecting to operate on a fully ‘clean’ basis by November. This means by the end of 2013 Standard Life will no longer offer the bundled retail share classes to new or existing customers on the platform except to facilitate re-registration.
David Tiller, head of platform propositions, told FTAdviser sister publication Investment Adviser said: “How can you have clients on different terms on a platform? Looking at the industry that is a change we have got to try to address.”
When asked whether Standard Life has advisers’ consent for the wholesale move to clean shares, Mr Tiller said he had not encountered any resistance to the plans and that the firm had consulted with some advisers beforehand.
He said: “At this point we have 80 per cent of assets on adviser charging and at the rate of conversion this issue will be very small. It is a difficult one but it has clear client benefits; the client is in a better place and the adviser is demonstrating the value of their advice.
“There are a handful of funds yet to launch clean share classes but by the end of the year they should be there across the board.
“If any manager does not launch a clean shares class then we will tell advisers but we will not necessarily take them off the platform straight away but the rebate will not be paid so the cost of the fund will go up.”
According to the firm’s official statement on the changes, there are three key reasons why the platform has accelerated its plans.
First, the platform said that the income tax liability on rebates from bundled mutual funds is a significant increase in the cost to investing for most advisers’ clients - between 0.15 per cent and 0.4 per cent on a typical bundled share class.
By paying the rebate tax bill until the end of 2013 and decisively moving to unbundled share classes Standard Life claims it is eliminating this additional cost, along with all the associated client conversations and tax reporting.
Second, Standard Life says this move is supporting the regulator’s desire for transparency as clean share classes facilitate ease of comparison and healthy competition.
Third, the platform said that completing a bulk conversion negates the requirement to create platform legacy.