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Transact predicts RDR ‘war’ over charges

Transact chief executive Ian Taylor has heralded the start of an RDR “war” with providers scrambling to buy distribution and advisers using their collective bargaining power to drive down fund management charges.

Speaking at the Institute of Financial Planning annual conference in Newport this morning, Taylor said: “It is like a war, we have this ancient empire of product providers going into war with the ancient empire of product distributors. We are reaching the end of the cold war of words in Canary Wharf. January is when the shooting begins.”

He said while there are advisers who see the appeal of remaining independent, there are a lot of advisers who realise that going restricted is a form of “regulatory insurance” under which advisers can group together for bargaining power.

He said fund managers are concerned about a future where restricted advisers club together to demand 50 basis point share classes.

Taylor said: “Life offices are probably faced with the most dramatic change of everyone. The life companies are more used to buying and controlling distribution than the asset managers and the platforms. So as we move into this brave new world, they are not going to give up easily.

“Life offices are already looking to control tied arrangements , to control advisers by buying them, and by pricing to them. They know they cannot give advisers money, but what they can do is reduce the price they give to their clients, so advisers can perhaps increase their own share of the charge.“

He added: “There is going to be a provider scramble to buy distribution. Everyone will say there is not, but in fact it has probably already started. These are the opening shots of the hot war. They will be buying up IFA firms left right and centre. “

Taylor also hit out at the FSA’s decision to ban cash rebates on platforms in favour of unit rebates. He reiterated his stance that platforms’ inability to recognise which units qualify for legacy commission and legacy commission rebates will cause “reconciliation chaos” unless the FSA retains cash rebates.

He added the FSA’s failure to work with the Government and HM Revenue & Customs on the tax implications of its platform rules, such as unit rebates, was “unforgivable”.

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Comments

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

  1. Roman Duzinkewycz 2nd October 2012 at 11:17 am

    Isn’t this a picture of Ricky Tomlinson aka ex England Football Manager? Things must be tough if he’s in Financial Services eh?!

  2. The FSA has nudged the industry in the direction straight for the rocks and we all know it!

  3. So here starts the war, and as I have said before this is the Tesco moment and advisers should seize the opportunity to benefit the consumer by demanding lower management fees from providers who for too long have over charged for poor performance on both funds and customer service and in some cases poor product design.

  4. maybe the solution to high charges is that fund managers only get paid on results, if they do not grow the value of a clients funds, then no AMC should be charged. If they grow, then an AMC based on banded profit levels achieved could be the best method of paying fund managers.

    That way if they do not perform they don’t get paid.

    Simples!

  5. A nice idea Ned, but in reality only about 30% of fund managers beat the index. They try to make out that it’s some kind of pseudo science, but we all know that most of them are no better than a monkey randomly picking stocks. They want paying regardless of how they perform.

  6. Nice idea ned, although if i was a client and the idea of only paying on market plus returns was posited for fund management, i might also think it would be a good idea for advice as well…….whats good for the goose and all that

  7. This strengthens the argument for the Vanguard and Dimensional funds I believe that this sector of the market will become even bigger.

  8. Replacing rebates would be a nightmare for providers and advisers. I imagine client charges will rise too as clean share prices will be less favourable that cash rebates.

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