28 November 2011

Investment managers will need at least three share classes for funds after RDR

Deloitte, the business advisory firm, says asset managers will need at least three share classes for investment funds after the implementation of the Retail Distribution review (RDR) – adding cost and complexity to their business.

Asset managers will need fund share classes for:

• pre-RDR business that includes the cost of advice;
• factory-gate pricing with no adviser remuneration included; and
• a share class that includes a platform charge.

Andrew Power, lead RDR partner at Deloitte, said: “Although no investment manager wants to have a huge number of share classes, we expect at least three may be required – and that will introduce significant operational complexity. The existing share class will be needed for existing business, a non-advised factory-gate share class that strips out all adviser charges and a hybrid share class that provides some type of remuneration, if allowed, to platforms.

“It may be that fund managers decide to restructure their fund range. If they have several UK equity funds, for example, they may decide to merge funds to reduce the overall number of share classes and make administration simpler.

“Many investment managers are putting off making any operational changes until the FSA has issued its updated platform paper in order to find out how fund management rebates might be handled. However, given the time available to make changes to systems and operations, investment managers can no longer wait until the FSA’s position is crystallised.”

Press release

© Deloitte LLP