How should platforms charge clients? Are ‘super-clean’, unbundled share classes fact or fiction? And, ultimately, how can we make sure that the end-investor is getting the best deal?
Cofunds recently added to the discussion with the decision to drop our £40 annual fixed platform charge.
This move is part of a broad review of our proposition, and is the first of a number of benefits we hope to deliver to our clients and their end-investors as a result of being part of the Legal & General Group.
Removing the charge will help to make investing on Cofunds more cost-effective for both small and large portfolios. We’ve said all along that our model is created for long-term sustainability.
That hasn’t changed, but our situation has. With the financial clout of a FTSE 100 giant behind us, we’re in an enviable position to enhance it still further.
Throughout the evolution of the explicit, unbundled charging regime, we’ve looked to take the route that we think will best serve our clients and the consumer.
In 2011, we pinned our colours to the mast and set out our new pricing model, built firmly around the principle of clean share classes. In a little over 12 months, clients have invested more than £5bn in clean share classes on Cofunds – including both new assets and those converted from bundled charging.
Quite simply, clean share classes make costs clearer for everyone: advisers agree their fees with their clients and platforms state what will be charged for the services they provide. Investors start to get a feel for what a good service should cost and, ultimately, the value of professional financial advice gets the recognition it deserves.
That doesn’t mean things will get more expensive. Indeed, our analysis of all investors holding money on Cofunds shows that the cost of investing in 80 per cent of clean share classes is exactly the same as it was for bundled charging. Furthermore, in 10 per cent of cases, it’s actually cheaper.
But as we’ve often pointed out, a platform such as Cofunds is just one link in the value chain. Enabling end-investors to see a reduction in overall price requires each link – including fund managers – to play its part.
That’s why we’ve written to fund groups asking for access to any preferential share classes they launch. In general, the reaction to this request has been positive, and we remain committed to fighting for the best rates for advisers and their clients.
Reducing the overall cost of investing is important – hence our commitment to enhancing our proposition and driving down prices.
However, it’s crucial that we never lose sight of the need to demonstrate value, not merely cheapness. Expert financial advice, skilled fund management and state-of-the-art platform technology are all things worth paying for.
What’s to be celebrated is that advisers and their clients now have a chance to understand and influence what that price should be.
Adam Smith is commercial director at Cofunds
