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Pressure on platforms to follow lead on disclosure

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IFAs are putting pressure on Cofunds, Standard Life and Skandia to follow Fidelity FundsNetwork’s lead and disclose their fund manager rebates.

Last week, FundsNetwork published full details of the fees it receives from fund management groups. It showed that most pay a 0.25 per cent charge while 16 funds pay the highest rate of 0.5 per cent.

Cofunds has pledged to publish its unbundled strategy from mid-September but it is unclear if the platform will reveal details of the fees it currently receives.

Skandia is insistent it cannot and will not disclose its charges because of contractual agreements with fund managers.

Last week, Skandia head of proposition Graham Bentley said: “We have contractual obligations with all our various fund manager partners that specifically prevent us from broadcasting commercially sensitive information such as their rebate arrangements.”

A 2009 list of income Skandia receives from fund managers, inclusive of trail commission to be passed on to the adviser, seen by Money Marketing, shows the provider took between 0.8 per cent and 0.9 per cent on most popular funds. It says this data is now “significantly” out of date.

Under Mifid, a platform is required to reveal the fund manager fees if they are asked. When approached by Money Marketing last week, Skandia said it would only give the information to clients or their advisers.

However, advisers requesting the information were told they had to demonstrate they were acting on behalf of a client and that Skandia had discretion over whether to pass on the information in the case of prospective clients.

Skandia adds that only five clients have asked for the rebate material over the last 12 months and have all received the information.

Forty Two Wealth Management partner Alan Dick says: “The fact that Skandia will not reveal its fees makes me sceptical. This move by Fidelity gives it a marketing edge because it is transparent and Skandia is not.”

Concept Financial Planning managing director Paul Richardson says Skandia’s market share could suffer if it does not give rebate information.

He says: “This is a fantastic move from Fidelity and puts pressure on the other guys to come out with an open policy. You have to wonder what will happen to Skandia’s market share if it does not start telling people what slice it is taking from fund managers. The firm has a set business model but that model is going to have to change.” The Langcat principal Mark Polson says: “With Cofunds making an announcement relatively soon, it is going to be difficult for Skandia to hold its line until the end of next year on this issue. It will need to have some conversations with its fund manager partners to tell them that being transparent and open about fees is the best approach.”

Axa Wealth chief executive Mike Kellard says the firm’s platform, Elevate, already operates a transparent model.

He says: “Elevate was designed with an RDR-friendly dual-pricing structure showing the cost of a fund based on the full fund charge less the cash rebate refunded. Elevate takes no listing charge from any of the fund groups available on the platform. As such, Elevate already has an RDR-ready pricing structure.”

But Standard Life appears to side with Skandia about the restrictions placed on platforms by existing commercial arrangements.

Head of investment group strategy and insight Graham Dow says: “We are fully supportive of the intent in the FSA paper to introduce transparency to the platform market but due to the commercial agreements we have in place, we are legally unable to disclose the fund manager rebates on our wrap platform at this time.”

Nucleus chief executive David Ferguson says transparent fund manager fees will increase consumer confidence in financial services. He says: “Much of consumers’ trust will be founded on transparency and consumer confidence.”

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Readers' comments (3)

  • Interesting to read Mike Kellard from AXA Wealth state they have a fully transparent model. Upon reading their guide to charges it appears they receive up to 28bps override from fund managers on their unbundled version, and also receive up to £5 kick back from every £12.50 charged for ETF trades.
    Is this transparency, Mr Kellard?
    As far as I can see, it is only the genuinely independent wraps such as Transact and Novia that are passing on in full all rebates received from retail share classes.

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  • As a GPP customer of Standard Life I made a request to them under COBS 6.4.3. They refused to comply citing commercial sensitivity. I'm now working through the escalation process, asking them to ensure that their complaince team is aware of the request and COBS 6.4.3 requirement to disclose, then formal complaint and finally FOS involvement.

    I've also notified the FSA Consumer helpline and they have filled out an investigation request form, which may well result in no action, but we'll see.

    It's sad that a firm appears to think that it can freely enter into commercial agreements to breach COBS and that those then take precedence over COBS.

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  • On a more positive note, Skandia, in pre-sales, agreed to disclose if I provided a list of the funds I use. That's entirely acceptable and a welcome difference to the replies by some places.

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