The RDR consultation paper suggests that fund managers could adapt to adviser-charging by offering a reasonable range of different share classes to support different levels of ongoing charges. Firms could also deal with adviser-charging through platform cash accounts, or through schemes to allow consumers to sell units at regular intervals.
Investment Management Association senior adviser of retail distribution Andy Maysey says: “Offering a large number of share classes would not work for numerous reasons, such as costs, the fact that it could be very easy for an adviser to place a client in the wrong share class for ongoing charges and unravelling that could be a nightmare for everyone.
“The platform route for paying ongoing commission is also problematic, given that not all of them offer cash accounts and neither do all platforms offer all funds.”
Gartmore head of UK retail Richard Pursglove says: “We believe that the introduction of multiple share classes would not be workable. It would have an impact on existing unit- holders and prospective unitholders and advisers as well as our strategic partners and platforms.”
Fidelity International UK retail sales head Peter Hicks says: “It will vary company by company but if you wanted to add several extra share classes to each of your funds multiplied by the number of fund managers in the industry it would be prohibitively expensive.”
Henderson New Star technical director Stewart Cazier says: “It would end up being an administrative nightmare and a number of groups would just opt out. It will force fund managers to decide if they are still in the distribution market.”
JP Morgan Asset Management launched B and C shares across its range on the back of the RDR in June 2007. Head of UK sales Jasper Berens says: “We have three share classes at the moment and are prepared to offer more if necessary. It could be hazardous for the likes of boutiques because of the extra layer of cost.”