FCA platform paper due in tomorrow

gadgetmind

Rollinghome wrote: »

But can be expensive depending who you're moving from. If you want to escape from Hargreaves Lansdown and transfer funds in specie it's £30 per fund, so over £300 for a typical portfolio.

True, but for funds you can bung the whole lot into something global and know you can move just that one without undue cost or risk.

My portfolios now tend to be tracker heavy but also feature REITs, ITs for less liquid markets (and to exploit irrational discounts), infrastructure and "themes" so are harder to move.

Maybe in a few years we can switch platforms within seconds, with one press of a button, and without it costing more than pennies. Why shouldn't this be possible?

pqrdef

Rollinghome wrote: »

HL are making a lot of the idea that they’ll be able to negotiate lower AMCs from fund managers so that even though their charges are higher they’ll still be competitive with others. That wouldn’t be in the spirit of RDR and seems a bit unlikely to me. Even if they could negotiate lower AMCs, I can’t see any attempt to blackmail the fund managers into not offering the same to other platforms going down well with the regulators.

At present, if you're the Tesco of fund supermarkets, you can use your buying power to get a bigger kickback out of the AMC - so the fund house keeps less - and pass it on to your customers, or not.

In tthe new regime, the big platforms will still have the same leverage to get the fund house to keep less, but they'll have to pass the advantage to the customer and it'll have to be done through a lower-AMC share class.

It certainly seems to be the intention that this will happen. The spirit of RDR was never about preventing platforms from competing.

Of course many funds already have retail and institutional classes, and platforms are sometimes able to sell institutional shares to retail customers. Mixtures would also be possible - get one I share for every R share - to avoid a plethora of discounted classes.

grey_gym_sock

pqrdef wrote: »

In tthe new regime, the big platforms will still have the same leverage to get the fund house to keep less, but they'll have to pass the advantage to the customer

yes.

and it'll have to be done through a lower-AMC share class.

ah - i don't think so. rebates in the form of extra units appear to be allowed. and even cash rebates, if it's no more than £1 per fund per month.

that would appear to allow more room for larger platforms to negotiate rebates which smaller platforms won't get. without the need to create a new fund class (which is allegedly very expensive) for every level of rebate.

we're probably talking about relatively small rebates now - say 0.1% - which would give about £1 monthly rebate on a fund holding of £12k, so only holdings over that size would require unit rebates instead of cash.

jimjames

grizzly1911 wrote: »

Do I take it that retail is the full monty, up front fee and trail. both of which can be rebated?

How do "no trail" and "clean" differ to each other?

I'm assuming No trail doesn't have the 0.5% commission but still pays the 0.25% platform charge. Clean doesn't pay either so should be 0.75% less than the retail and 0.25% less than no trail.

Rollinghome

pqrdef wrote: »

The spirit of RDR was never about preventing platforms from competing.

Quite, but allowing the biggest platforms to sell classes of funds that would then not be available to other platforms, including those accessible to IFAs, to enable the platform to be less competitive on its own fees would seem to be the opposite of promoting competition - both in the short term, and in the longer term if smaller competitors were consequently squeezed out not because they couldn't compete on the price of their service but because some products weren't available to them to sell.

Competition would be best encouraged by ensuring that all products are available through as many competing sources as possible. The example you give is a good one, Tesco are masters of using uncompetitive practices to exclude their opposition.

dunstonh

Are these now fixed fee or percentage of pot on advisor-friendly platforms?

Mostly tiered percentages. Based on "old style" retail charging, those with larger amounts pay less. Those with smaller amounts pay more. None of them differentiate between investment types. i.e. they charge the same whether its unit trust/OEICs, ITs, ETFs, Shares, SCARPs, FTDs, etc. Its based on amount on platform regardless of how it is invested.

Do I take it that retail is the full monty, up front fee and trail. both of which can be rebated?

How do "no trail" and "clean" differ to each other?

Retail is the full cost version. No trail is typically 0.5% less. This is semi-clean as it removes the IFA trail commission but retains the platform/retail commission. Clean removes trail commission and platform/retail commission and is typically around 0.75% less. So, a 1.5% AMC fund would be 0.75% in clean form.

SnowMan

Superb article on the FCA platform paper on Candid Money here.

Interesting paragraph on whether funds will have more than one clean version.

dunstonh

Hargreaves Lansdown has already fired a warning shot by saying commercial negotiations will affect the formulation of its Wealth 150 list in future

Isnt that a acknowledgement that HL base the Wealth 150 on what they are paid?

One surprise is the FCA confirming that platforms and discount brokers may continue to receive advertising fees from fund managers. Since this is a potential source of bias it's a strange decision.

That is effectively a hidden commission and a surprise that the FCA still allow it. It could be open to abuse. For example, one fund house may decide not to lower its clean charges but pay a larger advertising commission to the platform to keep its fund on some marketing list.

gadgetmind

"Hargreaves Lansdown has already fired a warning shot by saying commercial negotiations will affect the formulation of its Wealth 150 list in future..."

Just as they have in the past!

The next 12 to 24 months are going to be rather interesting.

jem16

dunstonh wrote: »

Isnt that a acknowledgement that HL base the Wealth 150 on what they are paid?

If it wasn't before (although I'm pretty sure it was) then it looks like that will certainly be the way going forward if HL get their way.

Offering places on a smaller Wealth 150 could incentivise fund groups to give the company preferential pricing, as they could expect more concentrated inflows.

http://www.moneymarketing.co.uk/investments/hargreaves-wealth-150-may-shrink-in-rdr-pricing-world/1070151.article