Clean share classes: What the different platforms are offering

Standard Life HQ 480
Standard Life is not offering clean share classes as it awaits details from the regulator

A Money Marketing study has revealed a vast difference in the number of clean share classes available through different adviser platforms with many only offering a small range.

Since Cofunds’ announced in September 2011 it was trying to negotiate clean share classes with fund managers there has been debate as to which tactics will offer the cheapest deal for the customer.

Skandia has made it clear it will not request clean share classes from fund managers as it feels clients receive a better deal through the unit rebate terms it negotiates with fund managers.

A Skandia spokeswoman says: “We are choosing not to use clean share classes, and do not currently have any on our platform, however there may be circumstances in the future where we will link to a clean share class. We intend to offer net AMCs that are equivalent of or lower than the clean price.”

Standard Life Wrap has also resisted the addition of clean share classes to its platform in favour of rebates. It says it is waiting for the outcome of the FSA’s final platform policy statement before making a firm decision. The policy statement was due before Christmas but has been delayed as the FSA looking to iron out some of the technicalities around its proposed rules.

Standard Life head of investment group relations Graham Dow says: “At this point in time, we have not added any clean share classes, that is because we are waiting on the detail from the regulator to see whether we need to get there.

“A lot of retail classes with a rebate take the price below the level of a clean share class, we would actually be working against the consumer interest if we pushed them towards clean. We are comfortable with our position of not offering clean share classes at this point in time.”

Fidelity FundsNetwork currently has 347 clean share classes available with a further 300 expected to be added by the end of the first quarter. The firm says it is waiting to see other “special deals” negotiated in the market before adding many more clean share classes.

Last year, Fidelity head of business development Ed Dymott said: “There have always been discussions around special deals being done between fund managers and platforms, and although FundsNetwork has never undertaken this type of approach, we will clearly be taking an active interest as these terms become disclosed to see if there are any material differences.”

Mark Polson
Mark Polson

The Lang Cat principal Mark Polson says: “It is becoming a necessity to have clean share classes available as more and more investments move between platforms. While some platforms are looking to get deals through rebates it is important they get clean available as soon as possible.”

AJ Bell, Seven Investment Management and Parmenion say advisers are able to access all clean share classes available in the UK through their platforms.

AJ Bell marketing director Billy Mackay says: “There is no restriction on the number of clean asset classes that you can access on our platform. As we have a stockbroking arm we can access any new share class that is launched. If we do not have terms out guys will get the terms from the fund group, apply them to the system then advisers are free to trade in the fund.”

Parmenion managing partner Richard Mein says: “The Parmenion platform has access to the entire universe of tradable securities. As a discretionary platform, fund purchases are at the discretion of the appropriate investment manager. Parmenion has predominantly purchased institutional units and thus the recent move towards clean share pricing in retail units has had only a small impact compared with other platforms.”

Hargreaves Lansdown is another platform which currently does not have any clean share classes available on its platform as it awaits clarity from the regulator in its upcoming policy statement.

Head of advice Danny Cox says: “We currently do not offer clean share classes but we may well do as we go forward, we are still waiting to see what comes out of the FSA’s final platform rules.”

Earlier in the month, Alliance Trust Savings was still finalising agreements with a number of leading fund groups leaving investors unable to place new investments with Invesco Perpetual, Fidelity, Schroders, Henderson, Threadneedle and Standard Life Investments. Apart from SLI, clean share classes have now been added from these fund groups.

From 1 January this year, new investors on the Alliance Trust Savings platform can only invest into clean share class funds, of which there are currently 1,200 available.

Platform proposition manager Brian Davidson says: “We operate a transparent charging model which makes very clear to the customer what they are paying and what we are charging. Clean share classes are the most transparent way of doing this and that is why we made this move from the start of this year.”

Novia chief executive Bill Vasilieff says multiple share classes of the same fund merely serve to confuse advisers and their clients and the platform has rejected requests from fund groups to add additional clean share classes.

He says: “We have a number of fund managers asking us to put their clean share class on the platform but have not done so yet as, there has been no adviser demand, they are not necessarily cheaper, multiple share classes cause confusion among advisers and investors.”

Platform Clean share classes Total Funds
Aegon 782 3000
AJ Bell n/a n/a
Ascentric 500 3500
Alliance Trust Savings 1200 1200
Avalon 2500 6000
Aviva 500 2200
Cofunds 2173 4300
Axa Elevate 690 2900
FundsNetwork 347 1500
Hargreaves Lansdown None 3000
James Brearley 1800 3536
James Hay 396 1865
Novia 795 2500
Nucleus 1400 5500
Parmenion 300 334
Praemium 1065 6100
Raymond James 2700 6000
7IM n/a n/a
Skandia None 1182
Standard Life None 2300
Transact 1095 8690
Wealthtime 700 2000
Zurich 200 1596