The FCA has stipulated that it would not expect a conversion from bundled to unbundled retail share classes to take place unless the cost to the customer was either the same or less.
Therefore, Michael Barrett, platform marketing manager at Skandia, says a client’s circumstances are best assessed on an individual basis.
Mr Barrett says as unbundled funds can often be more expensive (Skandia’s own research reveals that on average they are six basis points more expensive), but that platforms must do what is in their power to create a like-for-like or better outcome.
He says: “Platforms can use a unit rebate to offer a ‘discount’ on the unbundled share class by passing extra units in the fund back to the customer. Alternatively, platforms will seek to gain access to preferential share classes from fund groups.”
By looking for preferentially priced clean share classes (also known as super-clean) platforms have triggered a race to the bottom.
Super-clean are the same as clean in that the rebate is stripped out but Nucleus claimed this share class has on average reported six basis point lower charge. Those claiming to have secured bespoke rates say the chargeference can be much larger.
Terry Huddart, technical communications manager at Nucleus, says market forces (and FCA attention) will ensure that anyone with similar distribution capability, either individually or collectively, must ultimately secure the same price.
He says: “If you think that even the small example of a £100 a year pension drawdown charge on a £100,000 pot amounts to 10 basis points, and in some cases people are charged this much for each tranche, there are lots of other considerations.
“The biggest worry is that these corporate strategies ruin the regulator’s intention for increased fairness and clarity for consumers.”
Bill Vasilieff, chief executive of Novia, argues the increasing use of passives and exchange traded funds (ETFs) on platforms through discretionary fund managers can also give rise to more competitive pricing.
He says: “This campaign so far has turned out to be a damp squib. Super clean has so far not seen any traction in the market.”
However, the likes of direct-to-consumer platform Hargreaves and Standard Life claim to have been able to secure rates that mean average discounts of 0.1 per cent and in some cases much larger differentials. The true success of their efforts will only become clear once the picture across the wider market is known.
