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Getting ready for RDR: McKenna assesses Fidelity FundsNetwork

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It is widely accepted that the platform community is going to be one of the major beneficiaries of the RDR. Even the longest established platform providers have only been trading for just over a decade, so are not inhibited by legacy issues which increase operational cost for traditional life and pension providers.

Legacy issues are usually discussed in terms of systems but it is worth recognising that having products dating back 30 years or more with a wide range of different tax treatments applying can also bring with it considerable cost.

Even though they have a pedigree going back, as a fund supermarket, to the earliest days of the platform world, FundsNetwork is not constricted by several decades worth of old plans. In just over 10 years, it has cemented its position as one of the big three of the platform world with £32.9bn in assets on its platform and over one million clients or accounts at the end of August.

When it comes to helping advisers prepare for the big switch, David White, who took over as head of FundsNetwork in July, is quick to point to the 49 roadshows which 1,600 advisers have attended in recent weeks as evidence of its commitment to the IFA market. These gave an overview of the services the company has and will be launching in preparation for the RDR.

To help those advisers who do not want to actively manage a client’s investment strategy, preferring perhaps to concentrate on financial planning, FundsNetwork is adding an increasing number of discretionary fund managers to the platform but is doing so in ways that it says makes it explicit that client ownership clearly remains with the adviser.

I have come across many firms that find this an issue with some DFMs, so this is a welcome development and may be an approach others may choose to follow.

Another recent delivery has been the new Model Portfolio Management tools and Portfolio Evaluator service. These include the ability to create and maintain portfolios, assign models and carry out single client rebalancing, as well as bulk client rebalancing.

It has been suggested elsewhere recently that advisers are not looking for financial planning tools to be delivered by life offices and platforms.

I only partly agree with this statement. It is true that many bigger organisations are sourcing their own tools and operating them centrally but many smaller firms lack the financial resources to afford the best new tools. Delivering this sort of technology is expensive and some advisers, although possibly a minority by some measures, are looking for exactly this help from their business partners. It is, however, essential that the adviser should be fully able to understand the workings of the tools supplied in order to meet their assessing suitability obligations.

Fidelity as a group operates through multiple channels but White is keen to stress that FundsNetwork is a dedicated adviser business, insisting that everyone in his organisation is focused on the adviser community, indeed, if Fidelity direct customers seek certain products, such as drawdown, they are encouraged to seek advice.

No organisation can be fully RDR-ready at this time and much of what FundsNetwork is planning to deliver is scheduled to arrive during 2012. Key areas were specifically identified during our discussion adviser fees, unbundled pricing, additional products and particularly ETFs and platform-to-platform re-registration.

The unbundled pricing will, in fact, be the first of these to reach the market, currently estimated for release in the first quarter of next year, with ETFs arriving at around the same time.

An increased range of share classes will be launched as part of this process, so Funds Network will offer bundled and unbundled pricing, including loaded and unloaded share classes, that is, with and without rebates.

The adviser fees module, expected late second quarter or early third, will bring the capability to specify initial, ongoing and ad hoc fees to either a fixed financial value or percentage basis. This will be offered both by unit deduction and from the existing platform cash account facility.

As far as re-registration is concerned, FundsNetwork is committed to this going live by quarter four next year but is keen to stress it believes it has been leading the way in this area, being one of the first organisations to successfully test a message. It is quick to point out that, from a practical perspective, re-registration services will only be able to work effectively once a critical mass of relevant parties are in place.

FundsNetwork recognises that an increasing number of firms are settling on a multi-platform strategy and says it does not see it as part of its role to provide a full-blown client management system equivalent to Avelo or Intelliflo, rather it intends to build deep integration between the leading client management packages and FundsNetwork. I see this as really important and would have liked to have seen it given equal weight to the major deliveries identified above.

It is clear that Funds Network will be delivering a substantial range of services to support advisers over the next 13 months. This should enable it to fully capitalise on the movement of funds from packaged products to platforms that will be an inevitable consequence of advisers building deeper client relationships after the RDR.

Ian McKenna is director of the Finance & Technology Research Centre

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