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Topics: Cofunds| | multi-asset
A platform pricing regime based solely on unbundled charges will be detrimental to consumers and remove choice, warns Cofunds.
In a paper looking at the role of platforms and the RDR, Cofunds says unbundling every platform payment will only confuse clients.
"Our extensive experience shows us rebating in this way can add to consumer confusion," says the platform. "We are puzzled by industry voices who are demanding the only way platforms should be allowed to price is some form of unbundled solution."
It adds offering just an unbundled solution will remove choice and add complexity.
Cofunds thinks allowing a range of charging structures, leaving advisers and clients free to decide which one is most appropriate, will lead to greater clarity.
"That way the needs of the whole market are met, not just the 10% who opt for unbundled pricing but also the 90% of the market for whom bundled pricing is deemed most appropriate and for whom unbundled pricing could push up the cost of advice and add a further layer of confusion," it adds.
An unbundled solution risks overwhelming customers with technical information, exposing them to "the machinations of the transaction", says Cofunds.
"We are all too well aware our industry has a reputation for overwhelming consumers with product information in order to confuse and sometimes to pull the wool over the consumer's eyes," it says.
In a recent interview with our sister title Professional Adviser, CEO Brett Williams set out plans to offer customers both a bundled and unbundled option, which he said is key to providing advisers with a choice of facilities.
The original aim was for Cofunds to introduce the unbundled option towards the end of this year and start of 2011, but this timetable has been put back as the platform waits for FSA guidance on the issue.
Williams says: "Unbundled pricing is an important option but it is not realistic to think everyone wants it. If it was that important, it is available now so why are assets coming onto Cofunds which don't offer it yet?"
The Cofunds paper goes on to say in the aftermath of the financial crisis advisers should focus on life planning - such as goals, risk rating and portfolio management - and leave stock-picking to fund managers and analysts.
Although the platform thinks the underlying principles behind the RDR are sound, it believes the proposed legislation needs to address the problems it was originally set up to solve, including lack of trust in financial services as well as the UK's savings gap.
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| Comment | Limiting charging to 'unbundled' will confuse – Cofunds |
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For David Cowell
So David, unbundled is the only way? That's a rather narrow statement don't you think? Lets have an example: Bundled platform has a 1% net AMC which is split between Investment House and platform - split not disclosed - and the IFA takes 0.75% ongoing remuneration. Unbundled platform has a platform fee of 0.6% and the underlying fund has a net AMC of 0.5% - split disclosed - and the IFA takes 0.75% ongoing remuneration. Are you still convinced "unbundled" is the only way, even though it is more expensive? You can break things down into as many component parts as you want, but at the end of the day it is the total cost that the client bears which is the only important factor!
Posted by: You must be joking
who is "you must be joking"?
It would be useful if "you must be joking" revealed him or herself so that there could be a more intelligent debate.
Posted by: brian dennehy
"You must be joking " is...
Me :) An IFA of 24 years standing, who remembers the maximum commission agreement, agrees wholeheartedly with adviser/customer agreed charging but thinks (infact knows) that the more individual figures (unbundled) a client is given, the less interest they will take. If we listen to the likes of David Cowell, and apply his logic to other purchases, every time I bought a bottle of wine, I'd want to know how much the growers received, how much the producer received, how much the bottle cost, how much the importer received and then the distributor and finally the mark up made by the retailer. In all honesty, I don't care who received what, all I care about is does that bottle and contents provide me good value for the £10, £20, £50, £100 I've just spent...
Posted by: You must be joking
so who are you?
very interesting but unless you are prepared to say who you are you won't be taken seriously
Posted by: brian dennehy
Hi Brian
Who I am, isn't important. Call me a voice of reason or an argumentative g*t, either way the opinions expressed are my own. But hopefully they will be put forward in a reasoned manner. I've been in this industry a long time and have served it well (as it has served me) and unfortunately, as with most previous bandwagons the bundled/unbundled debate makes little sense.
Posted by: You must be joking
Platforms
The issue here is not who is correct bundled or unbundled!The advisor needs to be able to understand who's making what!-and so he should! -The real issue here is that the fact that this debate is takin place. It really heartens me -it is the end of the road for the fund management industry as we have known it . Once the average IFA enters this debate the games up for most life companies and the fat cat fund managers. IFA's need to be able to price and understand how to cut the costs of the service they are delivering . How much they pass on to the client depends on their sales style - The eventual outcome is we can have a very fruitfull period of moving funds to a more cost effective contracts that every one apart from the fund manager wins ,- You wont find me or many other IFA's cryin over their certain demise into a normall charge of around .01-.015 %which is where we will end up and is all that the service is worth. So the more debate the better carry on guys your doing a great job !
Posted by: newman
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What?
Does this chap expect to be taken seriously? The only way forward is for all the charges to be stated unequivocally. How can that be confusing? Having charged fees since the mid-80s, I see no problem unless the firm is deliberately trying to confuse, as would appear to be the case here.
Posted by: david cowell