The latest Investment Association Annual Survey is packed with interesting facts and figures on the state of investment nation. In 2014, fund platforms accounted for 55% of the UK gross retail sales (rising from 49% in 2013) and a whopping 89% of total net sales, bringing in around £18.4billion in net inflow.
Five platforms (Cofunds, Fidelity FundsNetwork, HL, Old Mutual and Transact) account for around three-quarters of the total platform market in terms of transactions, holding around £182 billion between them as at the end of 2014.
Looking at these numbers, we think that around 35% of the £1.1trillion assets of UK retail fund investors is now held on platforms. Platforms are indeed the custodians of people’s wealth!
But I digress. Buried on page 96 of the report is the suggestion that the new MiFID rules could result in a complete ban on commission from pre RDR off-platform business. The reports notes….
- The FCA decided not to impose a sunset clause in relation to the grandfathering of ongoing commission payments to advisers for undisturbed business written before the adviser charging rules came into force on 1 January 2013.
- While a 6 April 2016 sunset clause that affects all provider payments to platform service providers will mean that the payment of commission to advisers through platforms will end at that date, commision on legacy business that is paid directly by the provider to the adviser would not be affected.
- One possible outcome is that the combined impact of MiFID II and the likely stance of the FCA in implementing its requirements into UK regulation is that, in effect, such a sunset would be imposed from 3 January 2017, but the Association is planning to take this up with the FCA in order to see clarity around its intent.
If this turns out to be FCA’s stance, it’s bad new for advisers receiving trail from asset held directly with fund managers and potentially lifeco pensions. While MiFID II itself doesn’t apply directly to insurance-based investments and personal pensions, the FCA has already made its view very clear in DP15/3 Paper ‘that insurance-based investments and pensions should be governed, in principle, by the same conduct of business rules as MiFID II investments.’
Many advisers are yet to deal with the PS13/1 sunset clause of platforms. We heard recently that, just 7 months before the deadline of April, 2016, around a third of assets on Cofunds are still held in share classes paying trail commission! Imagine if advisers have to deal with a ban on trail commission on asset held directly with lifecos and fund managers, with only a few months’ notice?