Clean fee shares switch: ‘Impressive burst of activity’

Platforms are making good progress with the move to ‘clean fee’ share classes, according to independent experts.

Research by Investment Adviser published this morning shows that platforms have now moved almost half of their assets to clean fee shares, which do not pay trail commission to advisers or fees to platforms. The research was based on estimates from 11 of the UK’s biggest platforms.

Mark Polson, principal at The Lang Cat consultancy, said the data showed “an impressive burst of activity” from platforms to prepare for rule changes in April 2014 and April 2016. In 2016 all payments from funds to platforms sold pre-RDR has to be switched off.

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“You can see very well what the strategy is by the results in the table,” Mr Polson said. “It’s the sort of progress you might expect.”

Mr Polson added that platforms needed to be aware of FCA guidance on client detriment when switching from one share class to another.

Nucleus is switching clients in bulk from ‘bundled’ shares to ‘clean fee’ shares but only after it has ascertained that clients will not be worse off after the change. Transact has the ability to bulk switch clients but said it would only do so if an adviser requested it.

But other platforms – including Novia, Elevate and Standard Life – have pressed ahead with converting all funds regardless of the impact on fund costs.

Freddie Findlater, head of adviser platforms at The Platforum, said Investment Adviser’s research reflected a “real split” between platforms which support bulk switching and those which do not.

“I don’t think those who have left it to the advisers should be seen as worse than Standard Life or Elevate,” he said.

“This data sounds unsurprising given the approach some platforms have been taking. From my conversations with platforms [the move to clean fee shares] is still a big task but I’ve not spoken to one who is worried about meeting a deadline.”

Graham Bentley, managing director of independent consultancy GBI2, said: “If you can’t do unit rebates, it’s in your interests to move to clean. If you have poor rebate terms, even if you can do unit rebates they’re probably less advantageous than clean.”

Update: The article has been updated to clarify that clients of Transact will only be switched in bulk at the behest of an adviser, the platform is not enforcing bulk switching.

Investment Adviser’s research in full:

PlatformAssetsClean assetsClean value
Standard Life£16bn100%£16bn
Axa Elevate£7.5bn100%£7.5bn
Alliance Trust Savings£5.4bn99%£5.4bn
Raymond James£3.7bn88%£3.3bn

Source: Platform estimates