Brussels stepped back from a complete ban on retrocessions when it recently released a strategy to boost retail investments. Rather than ban all retrocessions – the controversial commissions paid to intermediaries –, it proposed to ban them only in some cases.
Data has shown fees for ‘clean’ share classes (which do not have commissions bundled into them) have fallen while their assets have risen. It’s a good advert for a commissions ban, surely. But a similar pattern – if not so dramatic – is observed for share classes still paying commissions.
It’s commonly thought that banks in Europe are those most opposed to the ban on commissions. Yet investment fund organisations have also opposed banning them.
They say investors may be doing themselves damage if they are influenced too much by costs – and they may still be paying for advice, but paying for it outside of the clean share class they buy into. In other words, the total cost of ownership for a fund is still higher than what is reflected in the quoted fund fee, including in countries with commisson bans.
The issue is complex, and data is sparse. Perhaps Brussels is right to hold off from a full ban until better visibility is gained.
Nick Fitzpatrick, Group Editor, Funds Europe
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