top of page
  • Writer's pictureNew South Law

A fifth of assets still in pre-RDR share classes

More than a fifth of the assets owned by UK retail investors are in share classes that continue to pay trail commission to advisers, data from consultancy firm Fitz Partners reveals.

Even though the Retial Distribution Review came into action around seven years ago, forcing asset management companies to introduce "clean" share classes which did not offer commission to the advisers selling the fund, 23% of UK retail assets are still held in Pre-RDR retail share classes, according to Fitz's data.

The RDR was brought in, back in 2012 to get rid of any potential conflicts of interest which could work against the investors interests.

Ever since the introduction, the onus has been on advisers, investment houses and platforms to encourage investors into the newer share classes.

Even though the proportion of assets that were held in the old share classes is still high, the number has been steadily decreasing since 2013.

The data shows that over 70% of UK fund assets were in pre-RDR share classes in 2013, falling to 28% in 2018. Fitz estimates this will fall further to 23% in 2019.

According to Fitz Partners, the difference between the legacy retail share classes and the so-called clean classes OCF (ongoing charge figure) is currently 0.59% on average across all asset classes.

Hugues Gillibert, chief executive of Fitz Partners, said: "The FCA's ruling facilitating the transfer of investors to clean share classes 18 months ago has had some effect, but maybe not as much as expected since it would not allow an easy switch of some retail investors who would have invested sometimes decades ago through an adviser, still being paid trail commission, and to whom they are still legally tied to.

"We expect to see a further decline in assets invested in legacy retail classes in the coming months as our clients are monitoring these share classes as part of their assessment of value," Mr Gillibert added.

Scott Gallacher, chartered financial planner at Rowley Turton Private Wealth Management, said he was not surprised by the findings, saying it would have been naive to think there would be a 100% transfer from the old to new share classes.

He said: "There's a number of reasons why some assets will still be held in the old share class. Some investors may not have opted to have ongoing advice, and are essentially advising themselves, therefore it would be their own fault they haven't transferred the assets over. Likewise it may not be cost-effective for some smaller clients to change over to a new platform and clean share class and pay for the ongoing advice this would involve."

43 views0 comments


bottom of page