I had been looking forward to Cofunds’ RDR strategic announcement as I expected it to shake the market up. It did not do that, preferring to be measured. Let’s have a look at what it did unveil.
Financial strength – it is profitable, well diversified and has £45m in the bank. 750,000 customers, 7,500 advisers, 27 execution-only brokers, 24 wealth managers, seven providers, three custodians/ platforms and a partridge in a pear tree cannot all be wrong.
Cofunds has gone to school on some of the unbundled wraps and will be launching similar functionality. It plans to increase adviser fee flexibility and I like the ability for advisers to apply different charge shapes to different segments of their client bank. Supporting adviser-level rebates (where the distributor has negotiated a better deal than Cofunds itself) is smart and will help with big deals.
One of the biggest bits of news is that Cofunds wants “clean” share classes only – so no rebates at all. It will be interesting to see how hard-line it wants to be over the next year or so – will fund managers who only want to do rebates be told to go and boil their bottoms?
Additional support, more development, greater transparency for advisers and clients – what is not to like? Full marks so far, and we should not underestimate the huge effort it takes to move a provider from being bundled to completely transparent.
The shame is all this will probably be overshadowed by the new charging structure. It has gone for a tiered structure, starting at 0.29 per cent up to £100k and added a £40 annual platform charge. The 0.2 per cent switch charge and initial charges have gone. So for some it is a few bps more expensive and for some (larger) clients a bit cheaper.
I do not mean to be nasty, but 0.29 per cent? Was there a bet to see if it could get prime numbers in? Any structure which starts at 0.29 per cent reads like it has been calibrated to show well on best advice systems rather than one born of conviction.
I am also troubled by the on-platform pension account which carries a £150 annual charge. Cofunds does not really have enough pension assets on the platform yet – a chance missed.
I would like to have seen Cofunds offer a flat 0.25 per cent up to say £500k, with no additional fees for the pension wrapper. The £40 is a take it or leave it. It all depends whether it wants to discourage lower-ticket business. Moving to that simple, clean structure would allow advisers to use Cofunds more often and would set the bar for all the wraps still charging 0.5 per cent or more.
I have a feeling this structure will not be what Cofunds launches next summer. I think the others will see this as a target and it will have to simplify and nudge down a few basis points. But we should not criticise too much. Announcing a year in advance is a very ballsy move and it deserves credit, as it does for setting itself squarely up for the future. All in all, an Abut we expected a bit better.
Mark Polson is principal of the lang cat