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Multiple share classes – whack-a-mole regulation?

Leading fund houses have rallied together in opposition of FSA proposals for multiple share classes outlined in the latest draft of the retail distribution review.

The RDR consultation paper suggests that fund managers could adapt to adviser charging by offering multiple share classes to support different levels of ongoing charges or use platform cash accounts and schemes to allow consumers to sell units at regular intervals.

But the Investment Management Association says share class proliferation would be costly, increase the risk of possible administrative error and could be a nightmare for everyone.

IMA senior adviser of retail distribution Andy Maysey says: “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.”

Skerritt Consultants head of investments Andy Merricks says: “This is a huge over complication of what really shouldn’t be a complicated matter. With multiple share classes, you’re beginning to go back to the dark days of insurance companies and pension contracts where you had different classes of units which all added to the smoke and mirrors.

“Everyone tries to fix something but it’s whack-a-mole regulation as you beat down one problem and another one pops up.”

Are fund managers right to object over the share class proliferation?

Do the alternative proposals give platforms too much power? By stepping in to process intermediary charges do platforms risk overcomplicating their own structures?

Let me know your thoughts by clicking on the comments link below.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. different share classes
    Non commercial bureaucrats with no experience of business and a complete lack of insight into costs and the levy thereof.

    5 steps backwards and this will then justify another £20M worth of well earned bonuses.

  2. Tony Trescothick (KMG) 21st July 2009 at 9:25 am

    Luxembourg can do it
    On the Lux funds we create, additional share classes are easily provided if required. There is nominal additional cost, of course, but it helps the manager to issue shares suitable for different client and perhaps adviser needs.

  3. Bureaucrats running the asylum
    Yet again the bureaucrats at the FSA think that ever more layers of ‘systems’ and ‘structures’ are the answer.
    As ‘anonymous’ says this will just mean more opportunities for the FSA morons to be able to claim that they are ‘in control’ and therefore somehow ‘deserve’ their inflated salary and bonus.
    It would be good if the Conservatives win the next election and do indeed totally disband the FSA as George Osborne said on the Andrew Marr show that they would. Hopefully this means closing it down completely, putting all the employees on the dole (after all on their ten year watch FOUR major banks have gone BUST) and not allowing it just to morph into a Consumer Protection agency as some commentators seem to suggest.

  4. Multiple Share Classes
    This is all very good, but surely IFAs have a duty to ensure best execution? If so, then surely the lowest cost share class is always going to be the one that IFAs must use? Or am I wildly out of touch with modern thinking?

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