Platform View: Taking a different approach

There has been an awful lot of coverage in the media in the past couple of weeks concerning different approaches to fund conversions from the current retail share classes to clean share classes by different platforms.

There has been a suggestion that there is a battle going on between platforms, but I don’t really see that, I just see different approaches being adopted.

There is also often commentary in the same articles concerning commission and I believe that this gets mistakenly included in the same debate.

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Just to be clear, commission has absolutely nothing to do with Novia’s approach to moving share classes as we facilitate adviser charging and have always done so since we launched the platform.

The issue about commission is that the bundled charging platforms (such as the big supermarkets) will no longer have rebates paid to them come 2016 (on their bundled business) and I would think they would therefore need to stop paying commission to the advisers at that point.

Technically, however, they don’t have to, it is their choice. If I was an adviser, I would be very concerned about that.

Going back to the issue about the varying approaches to share class conversions, it seems many platforms like Novia have decided that clean share classes are the way forward, providing a far more transparent offering to the adviser and consumer.

In order to provide these, there are two options – either the platform does the work or the advisers do. Novia has chosen the former and I think that this approach is favoured by advisers as indicated in the following two quotes from a single article. Nobody was quoted in favour of leaving advisers to do the work incidentally.

“Putting power in the hands of the advisers is all well and good, but also places a huge administrative burden [on them]. We look after close to 600 clients and you can imagine they might have between 14 and 20 individual holdings. Even just writing to 600 individual clients and getting their permission to do a transfer from retail to clean would be a huge undertaking”.

And also; “It should be the platforms who handle the conversion process. It will be a better service, it will be done more cheaply, quickly and advisers will not have to get involved to the same extent”.

The other approach that seems to be selected by one or two platforms is to reject that clean share classes are the future and instead opt to pay unit rebates to clients, which will still be allowed in future.

We at Novia decided to reject this on the basis that it would be confusing to clients, and all the advisers we have spoken to agree, as we all think clean share classes and transparency are the future.

So it’s a question of ‘you pay your money and you take your choice’ but we are confident that we have gone down the correct route that our advisers want.