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A year in platforms: Unbundled switching, new pricing and lots of fuss over preferential deals

The move away from bundled pricing towards clean share classes stole plenty of platform headlines this year.

In April, the Financial Conduct Authority confirmed that payments from fund managers to platforms would have to end altogether by the end of the first quarter of 2016 and would be banned on new business from April 2014.

Combined with HM Revenue & Customs’ decision to apply income tax on rebates to investors from April, the shift towards unbundling began. 

Standard Life elected to pay the income tax on behalf of clients for this tax year and is shifting all its business into clean share classes. Other platforms are planning a more gradual shift towards clean shares.

There is an outside chance that the situation could change again if Hargreaves Lansdown’s legal challenge to the introduction of income tax on rebates is upheld.

Some fund groups have said they will offer their institutional share class as their clean alternative, which The Lang Cat principal Mark Polson says is misleading. He says: “Regardless of terminology, institutions get far better rates in reality due to their scale. 

Platforms and groups of advisers should really be able to access the same terms but there is a lot of resistance to selling funds more cheaply.”

In November, the FCA said it does not expect conversion to clean share classes to take place where there is disadvantage to clients, meaning that advisers and platforms planning bulk conversions will have their work cut out to ensure no consumer detriment – a task which many argue is impossible.

Pricing changes 

Transact reduced its charge on an average £180,000 holding by around 15 per cent while Nucleus cut charges from 35bps to 25bps for assets over £500,000 from November.

The Platforum managing director Holly Mackay says margins will also be squeezed for fund groups. 

She says: “We estimate retail fund manager revenues will fall by 15 per cent over the next three years. We also anticipate a herd-like rush to the same ‘star managers’, driven by fear of the regulator pushing more adviser firms to outsource the investment management to a limited number of uber-powerful fund selectors.”

Among direct-to-consumer platforms, the price war is arguably even more intriguing with firms including AJ Bell and Charles Stanley capping their direct pricing at £200 and £150 a year respectively for unbundled business. 

Hargreaves Lansdown has pushed back its pricing announcement to next year but analysts predict it will have to introduce tiered charging from 70bps to 35bps to retain its current profit margin.

Preferential share classes

Both the shift to unbundled share classes and the introduction of new pricing structures are playing out against the backdrop of preferential share classes being agreed between fund managers and platforms.

Standard Life was the first to announce that six fund management groups had agreed to offer discounted share classes, while Cofunds and Fidelity have also pushed to secure the lowest available share classes. 

Acquisitions and innovations

In May, Legal & General took control of the Cofunds platform, purchasing the remaining 75 per cent stake in the business for £131m. Chief executive Chris Last then stepped down in September after just four months in the role.

Transact also moved in October to repurchase 4.5 per cent of the company from shareholders for £4.5m.

Elsewhere, Aegon will launch a D2C platform with a twist in the form of an adviser link-up while Skandia is considering a white-labelled direct offering which could be used by advisers. 

Looking ahead, consultancy Platform People head of due diligence Tony Peters says: “Many platforms are still struggling to justify themselves in terms of profitability and I think accounting departments are going to start to really crack down and demand that platforms start to pull their weight next year.”


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  1. 4.5% of Transact = £45 million which implies the company could be worth £1 billion. Unfortunately, there is an error in this article. What a shame because it destroys the credibility of the whole article.

    Merry Christmas!

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