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Platforms demand equal share class treatment from fund groups

Fidelity head of business development Ed Dymott

Rival platforms are demanding access to any new lower-cost share classes launched by fund managers and predict it will not be possible for Skandia or Standard Life to receive preferential terms.

Skandia and Standard both announced last week that they were to move away from their current unit rebate models following the recent HMRC announcement that rebates were to be taxed.

Standard Life says it will move to a clean share class model next April and will ask fund groups to offer preferential share classes that reflect the discounts investors were receiving through unit rebates. Skandia will continue to offer unit rebates through clean share classes but will also be pressuring fund groups to offer preferential share classes in the future.

Fidelity FundsNetwork and Cofunds say they expect access to the lowest fund prices in the market.

Fidelity head of business development Ed Dymott says: “If fund managers launch new share classes at a lower price, we will look to ensure our customers get access to these. However, there does seem to be a confused position around this view that some of the platforms in the market feel that they can get preferential terms.

“We believe there should be no meaningful difference in the prices we are offered against our nearest competitors. This seems to run counter to the idea of these terms being preferential.”

A Cofunds spokesman says: “Cofunds is confident it will always access the best price for clean funds.”

Transact adds it expects access to the lower share classes and says it would be unfair that advisers receive different access to funds depending on the platform they use.

Chief executive Ian Taylor says: “I do not see how or why advisers should be given different pricing depending on what platform they use. I would expect access to all share classes. Especially because any fund prices offered to platforms will be public knowledge.”

David Thompson
Elevate managing director David Thompson

Axa Elevate, Novia, AJ Bell, Aegon, Nucleus and Ascentric all say they will demand access to the lowest clean share classes available.

Elevate Managing director David Thompson says: “As and when fund managers make new enhanced clean share classes available we would expect to provide access to these through Elevate to ensure we continue to provide clients with the best possible value in the most simple and transparent way possible.”

Ascentric managing director Hugo Thorman says: “I do not think there is sufficient benefit just to offer platforms a special share class just because of a platform’s size and it does not provide any benefit to the fund manager.”

Money Marketing reported last week Kames Capital would not launch preferential share classes for individual platforms while other fund groups are considering their options.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. I don’t understand why smaller platforms feel so put out by not being given the same deal as larger platforms when it comes to clean share classes.
    Surely they are currently receiving a smaller rebate than the likes of CoFunds and FFN now, so why does a move to clean share classes make a difference to their bargaining power?
    Provided that there is still the facility to reregister, allowing a switch between share classes to be conducted without creating a capital gain then a free market economy allows those who create the best value for the fund managers to demand a better deal?

  2. Come on Mr Invesco & Mr M&G, stand by your guns.. you could kill this off straight away!

    One clean share class for all, afterall it won’t benefit the investor or their advisers, creates addition work for you, provides clarity of cost, and REMOVES opportunity for SL & Skandia and others to try an screw you down on charges to displace theirs!

    If you and other major Fund Managers stand together then their argument is lost!

    I for one, will not stop using your funds so cut their nonsense out now!

  3. It appears to me that if the whole industry moves to a single share class for all platforms model, then that means the distinguishing factor between them will always be the cost and service of the platform itself.

    Maybe this is making some platforms a little bit nervous as they will not be able to compete on one or both…

  4. It seems that the fund management industry has a golden opportunity to stand up to the financial marketeers.

    Two share classes, one institutional at 50bps and one retail at 100bps.

    If that means platforms can make a mark-up on institutional funds sold to the public by IFAS then that’s great. If an IFA is big enough to negotiate a discount for clients by getting institutional money direct with the fund manager, even better.

    Let the market decide, but do it without the smoke and mirrors.

    If I were Invesco Head of Sales I’d be selling Neil Woodwards funds at premium prices.

  5. So that`s what happended to Rodney Trotter !!

  6. This is a golden opportunity for fund companies to cut the mutual umbilical cord wrapped around their necks.

    However it’s dressed up, the primary driver for rebates or creating different share classes is maintaining and/or increasing distribution. The FCA know this and will take action about it sooner or later. The HMRC decision was just a lucky break along the road.

    Having even a relatively small number of different share classes (say 5 or 6) in the same fund and then multiplying this across funds is verging on the absurd. How will fund companies manage this in practice? Performance reporting? How will advisers manage the suitability issues this creates? Transfers? The list is long.

    Fund companies… the tide is coming in. You’re up to your waist. Don’t wait until it’s up to your neck.

    Carpe diem

  7. My goodness, that is a terrible photo Money Marketing… Where did you get that from?!?!

  8. On the assumption that the large platforms already receive a better deal than the smaller ones, the removal of that advantage could result in higher charges for investors. Re-registration and administration issues aside, that cannot be desirable.

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