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Martin Davis: “We want a clean share class….it is not complicated’

Cofunds has rejected suggestions that Fidelity FundsNetwork upstaged its unbundled pricing model by revealing the fund manager fees it receives, saying the move is “completely irrelevant”.

Last week, Cofunds revealed the details of its unbundled charging structure which is made up of a £40 annual charge in addition to a sliding scale of annual management charges from 0.15 per cent to 0.29 per cent. The day before the announcement, Fidelity revealed it will launch its own unbundled structure in the first quarter of 2012. On September 1, it published details of the fees it receives from fund managers.

Speaking to Money Marketing, Cofunds chief executive Martin Davis says: “This move is one that Fidelity has been getting very righteous over but it is completely irrelevant because all rebates in the Cofunds model go back to the client.”

Davis, a former Openwork chief executive who made the move from the network to the platform in July, has also raised questions over whether Fidelity will be able to develop its unbundled pricing model by the first quarter of 2012.

He says: “It takes a long time to develop these models and we have said it will be July next year when we can launch the proposition. Fidelity has come out and said it will do it by the first quarter but it does not seem to have any details about what it will look like. Fidelity almost certainly has not yet begun negotiations with fund managers over pricing.”

Although Davis says Cofunds and Fidelity are on a similar development path in terms of unbundled pricing models, he believes Skandia is still a long way behind.
He says: “Skandia is further back because it does not want to declare the rebates, most probably because they are higher and it does not want to go unbundled because I am not sure it can from a technology perspective.”

Cofunds is trying to negotiate a clean share class with fund managers, which Skandia and Fidelity have both ruled out.

Fidelity says a clean share class could reduce choice for advisers but Davis says: “I do not agree it would restrict choice, the current share class of 150bps is not what we want. We want a clean share class that just reflects the fund manager fee, it is not complicated.”

Davis has raised concerns over the dangers of other platforms asking for a share class above 75bps, which he says would be less transparent than the clean share class that Cofunds has requested.

He says: “A share class of 100bps would mean investors would just see the overall charge and nobody would know what the platform fee is and what the fund manager fee is, which would be a step backwards.”

The issue of rebates has been a pertinent one for platforms in recent months. In August, the FSA delayed its final decision on whether to ban cash rebates being paid by platforms to clients and declared that it wanted to ban all payments between providers and platforms.

The regulator said it is “desirable” to ban cash rebates from product providers to investors and product provider payments to platforms but it wants to conduct further research into the implications of the rules.

Davis believes the FSA is also considering extending the rebate ban to life companies.

He says: “The way that things stand, the market would be skewed towards opaque insured funds offered by life companies because of the payment via a rebate.

We could end up with people investing in those horrible products where nobody knows if it is suitable for the client until it all goes wrong, like it did with endowments.”

He says: “Undoubtedly, there will be more advisers white-labelling the platform to be able to offer low-end clients an execution-only service.”


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