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Unbundling tactics: Different platform approaches risk confusion

Skandia, Cofunds and Fidelity FundsNetwork are adopting a range of different approaches when it comes to unbundling their platform charges, risking client confusion and causing complexity for advisers.

Under FCA rules, from April platforms operating a bundled charging structure for existing business will have to switch to an unbundled platform fee where there is a ‘disturbance event’, such as a fund top-up or change to the product. Cash rebates and fund manager payments to platforms are banned on new business.

FundsNetwork and Cofunds have decided that where these trigger events occur, they will automatically switch clients into equivalent clean share classes.

The platforms have also ruled a trigger event on one fund holding will see that segment of the portfolio switch to an unbundled fee with the rest able to stay in a bundled fee structure.

But Skandia will still keep clients in rebate-paying share classes, with the rebate paid in units to the client account and the platform fee paid from the client cash account. The platform has also decided any disturbance event on a portfolio holding will see the entire client account switch to an unbundled platform fee. 

Skandia is considering an option to automatically switch clients in unwrapped platform accounts into clean funds, as rebates held outside of tax wrappers are subject to income tax.

Derbyshire Booth managing director Greg Heath says: “We are seeing these differences causing clients problems now. They get different information from different platforms and call us because they are bamboozled. It is information overload.”


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