The Financial Conduct Authority (FCA) is pushing for fund companies to smoothly convert unit holders to post-Retail Distribution Review (RDR)’clean’ share classes that are free of adviser rebates.
According to guidance issued this week, the FCA expects most fund companies to achieve the shift by converting existing units to the new share class rather than by switching, which involves cancelling one unit and issuing another.
Fund companies should notify their investors in advance and give them the opportunity to object, says the guidance.
“This guidance is intended to benefit all clients, including those who choose to invest via nominees, by ensuring that they are kept adequately informed during the conversion process,” says the FCA. “By issuing this guidance, we hope to ensure that clients who are either pro-actively converted or who request a conversion, benefit from a smooth and uniform process.”
Some fund platforms see in the shift to clean share classes a chance to differentiate themselves from their competitors with their customer service.
“We firmly believe that the conversion to clean share classes is in the best interests of the consumer, and wholeheartedly support the FCA’s drive to ensure this process happens as quickly and smoothly as possible,” says Richard Stone, chief executive elect at The Share Centre, a retail stockbroker that also sells funds.
Stone says The Share Centre replaced over 2,000 existing funds in September with clean share classes “to prevent our customers from inadvertently spending more on trail commission with new purchases”.
He adds: “It is crucial that there is an equal playing field between investing in equities and investing in funds, since fund investment is a popular means for investors to diversify their portfolios.”
©2013 funds europe
