Cofunds’ reversal of plans to convert all bundled investments into clean share classes when re-registering off the platform is a welcome move.
The firm provoked adviser anger by introducing the policy when big rivals do not offer corresponding clean share classes.
It added needless complexity to the re-registration process and meant an end to the adviser’s trail, due to the transfer being treated as an advised event.
Instead, Cofunds will now allow both the re-registration off platform in the share class the investor holds or in a clean share class.
Cofunds says it was forced into the U-turn by what it considers the failure of rivals to join the new “clean transparent” RDR world.
However, the platform had always known that rivals such as Skandia and Standard Life would be pursuing very different share class tactics.
Whether an over-eagerness to be seen as crusaders for transparency, two fingers up at rival propositions or a hurdle to business seeping out the back door it has turned into an own goal.
The episode also highlights the fund charging complexities evident in the market. Recent Money Marketing investigations have highlighted both the huge variations in clean share classes available across different platforms and discounts investors can receive through the unit rebate model.
Comparing clean share classes, discounted clean share classes and different unit rebate models will not be easy.
The complex landscape creates more question marks over the FSA’s bizarre decision to ban cash rebates due to concerns they would “hinder transparency”.
It is hard to see how Financial Conduct Authority chief executive Martin Wheatley’s goal of great transparency driving down fees will be achieved given the current messy situation.
Firms retain advice responsibility
FSA technical specialist Rory Percival’s comments on DFM due diligence are a welcome reminder that while advisers can outsource investment management, they remain responsible for the advice.
The regulator is concerned over a possible mis-match between the risk profiling being done by the DFM and the adviser firm and is calling on advisers to make sure these are aligned.
Outsourcing elements of your client base to a DFM or other investment proposition can offer client benefits but the decision must be properly justified and regularly monitored to ensure their best interests are being served.