In advance of the Retail Distribution Review, Terry Huddart, technical communications manager at Nucleus, says the three fund supermarkets and handful of wraps who charged through retaining rebates introduced ‘unbundled’ charging structures.
Mr Huddart says these new charging structures were also to varying degrees price cuts with the aim of competing with the already unbundled platforms that charged explicitly.
He says: “The other main driver for platform pricing change has simply been a competitive market where wrap platforms have lowered their core charges.
“Platforms have also been banned from cross-subsidising fund and platform charges so this has led to some re-pricing activity.”
All in all, Mr Huddart says as of November 2013 he calculated 11 platforms had either altered or cut their charges in the previous 14 months.
He says: “This [re-pricing] is great because lots of consumers are both paying less and have clarity on what they are paying, although there is still a long way to go because so much money is in platform legacy books and even more in non-platform products which is an area that has not yet come under the new transparency rules.”
Bill Vasilieff, chief executive of Novia, agrees it is clear the direction of travel for the industry is towards a transparent charging structure utilising clean share classes, but the vehicles platforms are choosing to travel in vary.
Mr Vasilieff says: “Some platforms are striving to keep these potentially complex charging structures as simple as possible, others are adopting the Ryanair approach, incorporating an extensive menu of additional costs for any additional services they might provide, such as rebalancing.”
Additional costs can include transaction fees, switching costs, charges for dealing in paper or over the telephone, exit fees, cash management admin charges, and even the indirect costs of the platform retaining interest on client cash accounts.
FTAdviser has revealed details of an investigation into what various platforms make out of client cash. Out of 13 platforms covered, only three said they do not take any interest and pass the rate on in full.
But Stephen Wynne Jones, head of marketing at Cofunds, says the change is not as dramatic as some may claim.
So-called ‘super clean’ is just the rebate-free equivalent of a preferential price that has always been offered to large distributors by fund groups and was previously facilitated through rebates, he explains.
He says preferential pricing is usually offered for restricting choice through a panel of funds - even some restricted adviser groups can access cheaper share classes directly - or for platforms demonstrating they can sell a high volume.
Many of the smaller wraps have argued that in the interests of pushing down prices across the board there should be no exclusivity to these offers - and indeed some fund groups have previously said they will not offer ‘super-clean’ preferential rates or that they will offer a ‘cheapest’ rate to a range of platform ‘partners’.
Another consideration with super-clean is the challenge this poses to another FCA objective, enabling more efficient re-registration of client assets between platforms to stimulate competition.