Equities  

Don’t lose sight of Keydata threat amid clean-fee focus

John Lappin

Nearly half of the money invested on platforms is now ‘clean’ of commission.

Evolving may not quite be the word, but it is clear that the market is moving reasonably rapidly to the new world.

It is also certainly of some passing interest to see Skandia lagging its peers significantly, though it would have been even more significant without the 2016 sunset clause.

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So are we seeing the dawning of a new world for clients? Well that is a little more difficult to know. For example has the shape and nature of client portfolios changed now the real and perceived bias of commission is being removed from the market?

We know the move to clean share classes cannot be easily divided from other modernisations surrounding portfolios, diversification and risk.

Stripping commission from portfolios is only one component in the process. It is also surely relevant to ask whether this change cuts not just investment risk, but the risk of misselling or bias?

Yet again, that is also very difficult to test, although there are things that can’t happen now. For example, fund managers and insurers/platforms can no longer drive business into a particular fund by offering commission special offers. The fund manager now stands or falls on being a good or bad fund manager.

All of this is an improvement, not just because it removes bias, but it also must eventually deal with some of the negative perceptions in the media and among policymakers.

However, before we crack open the champagne there remains one significant problem. That is Keydata – or to put it another way, the gift that keeps on taking. One could also add various assorted Ucis failures as well.

The scale of costs at Sesame Bankhall following its past business review, revealed in Friends Provident’s recent results, are eye-watering coming in at £19m.

This may be a prudent provision and hopefully any exposure will not be quite so high. But it is terrible news for a host of reasons.

The first is that this issue is going to dog the reputation of the advice sector for a very long time. It doesn’t matter where you stand on the original Keydata issue and what advisers could or could not have reasonably foreseen.

At this scale, the provision makes a huge dent in Friends Provident’s overall results, albeit cushioned by significantly increased profits elsewhere. It would be foolish to believe that all options for Sesame’s future have not been considered at some stage in the past few months.

It is probably reasonable to suggest that outside of the banks, Sesame Bankhall’s boss John Cowan holds one of the most important roles in financial services.