Apr 262013
 

The UK Financial Conduct Authority (FCA) – the new, allegedly improved successor to the FSA – has published the long-awaited “platform paper” setting out new rules on rebates of fund charges from fund managers to investment platforms.

This follows the Retail Distribution Review rules that came into effect at the beginning of the year, which banned financial advisers from receiving ongoing payments made by fund managers (a practice known as trail commission). The FCA will now bring in something similar for investment platforms, which are the intermediaries where the investor or adviser can access funds from many different fund firms in a single place.

These rules will radically alter the way that UK platforms and fund supermarkets charge for their services, since most currently rely on these rebates as some or all of their charges. In future, they will need to charge investors directly for their services.

For more background on how rebates and charges currently work, see this earlier article on RDR and unbundled pricing. Below is a quick summary of the FCA’s new rules and what they may mean for investors. Continue reading »

Jan 102013
 

The temporary but large reduction in funds available for investment on the Alliance Trust Savings platform – give quite high profile coverage in the Daily Telegraph – is another example of why picking a new fund supermarket requires caution while the effects of the Retail Distribution Review are still working their way through.

I am not inclined to castigate ATS too much over this – it is reacting to RDR and the platform review far more pre-emptively than most of its peers and it’s to be commended for moving to clean pricing as quickly as possible. Perhaps the change could have been better communicated, but ATS seems to have a fairly comprehensive RDR changes page to update users on progress.

The new terms on fund charges [PDF] generally look significantly better. Obviously, you need to allow for ATS’s charges on top of the clean fees, but seeing some firms already bringing their fees down on a transparent basis should hopefully drive competition across all platforms. Continue reading »

Nov 132012
 

The FSA’s Retail Distribution Review (RDR) is set to shake up investment costs in the UK enormously over the next year or so. With effect from January 2013, financial advisers will no longer be able to receive trail commission – ongoing payments from fund groups – on new investments.

More importantly for DIY investors, the FSA is then likely to ban fund platforms for receiving trail commission with effect from January 2014. This means that the fees currently charged by many execution-only firms will have to change drastically.

Once that happens, many of the details in this site’s UK fund supermarket comparison table will change significantly. Unfortunately, exactly what fund supermarket pricing will look like once RDR is complete isn’t clear, making it hard to choose a new provider at the moment.

However, many of the major fund platforms have now announced their “unbundled” charging schemes – unbundled meaning that they must transparently and explicitly charge the investor for their services, rather than getting paid a platform fee in the background out of trail commission. And this is beginning to give us some idea of what fees may look like in a year or so. Continue reading »