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PIMS 2014: Cofunds in talks with FCA over orphan clients

Cofunds is in talks with the FCA over how to tackle orphan clients ahead of the platform rebates ban on legacy business coming into effect in April 2016.

Since 6 April, rebates between fund managers and platforms and cash rebates have been banned on new business. Platforms have been given until April 2016 to comply with the ban on payments from fund managers to platforms on legacy business.

Speaking at the PIMS conference today on board the Aurora, Cofunds distribution director Andy Coleman said Cofunds has so far converted around 25 per cent of its £66bn assets to clean. He said: “The majority of high-net-worth customers will be converted to clean through disturbance events before April 2016.

“My concern is there are a significant number of smaller wealth accumulators that will be left with no advice and no instruction on what to do with their portfolios. And the biggest challenge for the platforms is what do we do with those customers.

“Our terms and conditions suggest the last resort is to return the investment back to the client and that is wholly unacceptable so a solution must be found for these clients.”

Coleman said if Cofunds was to convert all of its clients to clean share classes in bulk, it would have to turn off trail commission for some 600,000 clients. He said: “It would mean we would have about 600,000 clients we were not charging any remuneration on and therefore all of the market rate trail would be turned off for advisers, because our terms and conditions do not allow us to charge the customer a fee. 

“So we could do it, but the consequences would be unpalatable for us. We are in conversations with the regulator to say, ’what do you want us to do with the rump of clients who are still sitting on our platform in April 2016 and have not been engaged with’.”

Coleman added that throughout this year the platform expects the conversion to clean to be adviser-led, and that next year it will work with advisers on the process, and by 2016 it will begin writing to investors directly. 


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