The issues that ‘Super Clean’ share classes have ignored!

FT Adviser ArticleIt amazes me that fund houses still believe that they can influence distribution by offering commercial terms to platforms, unless of course they have been assured that fund flows will follow?

The FCA’s COBS 6.1F clearly states  that platforms must take reasonable steps  to ensure that the platform presents its retail investment products without bias, so what is the attraction?

Our observations have been that the introduction of ‘super clean’ share classes has added little economic benefit to clients while adding hugely to the costs and time taken to switch between platforms.

Admittedly these issues only arise upon a decision being made to move from one platform to another, but we live in a competitive environment, if you are happy with your proposition why impose barriers to exit?

Those barriers are as follows:

·        CGT

·        Equalisation

·        Trading Costs

·        Bid – Offer Spreads

The re-registration of assets simply requires a stock transfer from one platform nominee name to the other, the benefit being that no stock is bought or sold, it is simply a change of ownership.

Should the receiving platform not have access to the ceding platforms ‘Super Clean’ share class, they have to switch to a share class that the receiving platform does have access to.  This requires a switch from one  fund to another giving rise to potential CGT, trading costs, bid offer spreads and equalisation issues.  This, I believe, could contravene outcome 6 of TCF.  ‘Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.’

These additional implications have caused significant delays in the re-registration of client assets, and I very much doubt that the client is put in the same financial position as they were prior to the move.

Advisers, now more than ever are responsible for client outcomes and therefore must ‘own’ as much of the outcome as possible. Allowing that to become polluted by (or even guided by) the commercial interests of a platform seems to undermine everything that is great about the client / adviser relationship.

When will platforms realise that service is the only real differentiator, not price.  It only takes one bad experience and that client (financial adviser) will be gone for good, so forget scratching around to secure meaningless deals and invest in your service proposition.

 

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