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Mike Kellard: New share classes are not in clients’ interests


I have been watching the recent debate on clean share classes with interest and have a few observations about how the industry should embrace the changes.

A week may be a long time in politics. It certainly seems to be in the platform world right now. While everyone was waiting with baited breath for the regulator’s platform paper, HMRC entered the fray and sent the industry into frenzy.

With the introduction of the RDR, and the latest news from HMRC that rebates are to be taxed, ahead of the expected platform paper, this all sounds the death knell for fund rebates.

As a result it seems all platforms are now converts to the clean share class religion. This is certainly quite a surprise for some who were, and apparently are, so wedded to rebates.

Since the start of the year we have a seen a real surge in interest from advisers in clean share classes. This was the case even before the HMRC announcement so forward thinking advisers were clearly not waiting to be pushed either.

We have seen a growing trend for both new money to go into clean share classes and for existing holdings to be switched from the rebate paying share classes. As a result we plan to add another 1,000 clean share classes to Axa Wealth Elevate over the summer, to add to the 1,600 already availlable.   

It is too early to tell the exact impact the taxation on rebates will have on advisers. However, we expect the popularity of clean share class to increase dramatically as a result of the announcement, with advisers looking to invest with confidence that new money will not be subject to tax.

Clean share classes also provide the clarity, transparency and ease of understanding that the customer and the regulator require.

The industry as a whole should now embrace this new transparent model and not seek to muddy the waters with uber, super or even super-duper clean share classes, unless there is clear advantage for the client and transparency is maintained.

Should fund managers make new enhanced clean share classes available we would expect to provide access to these through Elevate.

However, we do not believe the proliferation of share classes is necessarily in the best interests of advisers or clients as it will make it difficult to move funds from one provider to another and add enormous, unnecessary complexity to the advice process. 

Mike Kellard is chief executive at AXA Wealth



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There is one comment at the moment, we would love to hear your opinion too.

  1. Hear ,hear,I agree entirely,if RDR is about transaprency of fees how can the regulator allow discounts as HL and Skandia want ? Mr Wheatley would do well to sort this out quickly instead of pontificating on structured products, which are already dealt with under existing rules.

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