Platforms benefits for fund managers - · PDF fileThe Changing World of Wraps and Platforms – challenges and solutions for 2012 Wednesday 9th May 2012 1 Platforms benefits for fund

The Changing World of Wraps and Platforms –challenges and solutions for 2012

Wednesday 9th May 2012

1

Platforms benefits for fund managers

For Investment Professionals only. Not to be relied upon by Private Investors.

Platforms – benefits for fund managers

May 2012

Paul Richards – Head of Sales

What I will cover today

1 Role of the platform

2 H i thi h i ?2 How is this changing?

3 What about the price?

4 So what remains unanswered?

111



2

Don’t forget the customer

Capitaladequacy

ExamsOld share

TransitionLegacy assets

Staying in business

• Bonds and pensions

classes to new

112

Transition to fees

How do I explain this to my clients?

Bonds and pensions• Back book

Role of the platform1



3

What is a platform?

Technology and Servicing System

Technology Platform

Back-Office Platform

g y

Online Transfer Agency

Administration System

Servicing Platform

Fund Supermarket

Wrap

Record-keeping engine

Aggregator

Custodian

DBWorkplace Restricted

Numerous market segments

NonAdvised

Advised

p

Institutional

115

DCExecutionOnly

WealthManager



4

Depends how you look at it…

Platform

To all parties, it’s a service...

Through a fund manager’s eyes

Route to market – Intermediated, Direct / DC

Aggregator / record keeper / custodian Fund managers happy to pay

Facilitator of disclosure / adviser remuneration

Distributor?

happy to pay for this service



5

Distributor role

Does platform influence flows? Marketing / sales activity

D2C platforms have much greater influence than adviser platforms?

Investment solutions– numerous examples to concentrate flows

How is this valued and how is it paid for?

How is this changing?2



6

Drivers for change

Market practice

Adoption of wraps

Factory gate pricing

Move to fees

Cash rebates

Platform rebates

Legacy / trail

Regulation

FSA’s view

‘The crucial issue is what is in the interests of

November 2010 (CP10/29)

November 2011 (PS11/9)

‘We have decided not to propose changes that would

vs

consumers. We considered these arguments carefully before reaching our decision. We have decided that it would be desirable, in principle, to ban payments by product providers to platforms and to ban cash rebates to consumers. However, we accept that there could be possible unintended consequences which might arise that are not yet fully understood. So, although this is our intention, we have not yet made rules to introduce a ban of either kind of payment. In order to inform our decision on the appropriate timescale for making any rules, we plan to carry out further work, including careful consideration of the impact on consumers

require product charges and platform charges to be separated (i.e. bring an end to bundled charging). Instead of this, we propose still to allow fund managers and other product providers to make payments to platforms for the administration services they receive, subject to improved disclosure of the payments to consumers and impartiality in the presentation of products.‘

'We do not want to see a situation develop where advisers set their charge dependent on what rebate is available to be paid into the client’s cash account, from which the adviser will then take their charge as careful consideration of the impact on consumers,

business model analysis of the platforms market and research into the way consumers engage with this market. We will also consider the timetable for consultation on any proposed rule changes and whether transitional arrangements would be appropriate…. What we can say at this stage is that any rule changes we make in this area will not come into force before 31 December 2012.’

from which the adviser will then take their charge, as we feel this would undermine the objectives of the RDR. Accordingly, we propose for this reason to ban cash rebates to consumers.'



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OPTION 3Factory Gate

OPTION 1All in pricing

OPTION 2Net Commission

Share class options

Intermediary

Platform

Fund partner

Fund AMCincludes

platform fee

Fund AMCincludes

platform and distribution fee

Net fund fee

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Platform fee paid from product

Commission to intermediary or rebate paid to client

Platform fee paid from product

Explicit fee from customer to intermediary

Platform fee paid explicitly

Explicit fee from customer

‘Bundled’ share class

Will need to be retained in any event to cater for:

Legacy business

A

D2C business

B

Evolution from legacy could be slow



8

What’s happening in practice?

What’s happening in practice?

clean

clean and bundled

clean

clean

looking at both platform loaded

clean

clean

clean and bundled

clean and bundled

clean and bundled

clean and bundled

clean

clean

clean

clean

clean and bundled

clean and bundled

pand clean but have yet to decide

have both platform loaded and clean but have yet to decide

looking at both

clean

clean and bundled bundled only

clean

gplatform loaded and clean but have yet to decide



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What about the price?3

Are all distributors created equal?



10

One price fits all?

FundGroup?

Platform?

InstitutionNetworkmember

Small / medium IFA

LargeNetwork / National

p

Intermediary?

Platform

Adviser

Possible share classes?

75 bps? 65 bps? 60 bps?

Standard? Platform? Distributor?



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Discounting a possible solution?

15 bps?

‘However, this is messy to administer and doesn’t it just take us back to rebating…

60 bps?Client Cash Account

Client Units

130

i.e. takes us away from the bottom up pricing, which we all thought we wanted?’

So what remains unanswered?4



12

What has been covered today?

Platforms continue to provide value for fund groups and will host a wider variety of share classes butand will host a wider variety of share classes, but…

Will groups continue to reflect ‘distribution capability’ of platforms or is it one size fits all?

Will true distributors exert greater influence on flows and therefore price?

Will separate share classes or messy discounts be the way to reflect enhanced terms?

How will restricted models change role of platforms?

Documents

Platforms benefits for fund managers - · PDF fileThe Changing World of Wraps and Platforms – challenges and solutions for 2012 Wednesday 9th May 2012 1 Platforms benefits for fund