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Hargreaves demands exclusive share classes in post RDR world
by Danielle Levy on May 23, 2013 at 07:20
Hargreaves Lansdown is pushing fund groups to offer it exclusive clean share classes and is floating the idea of funds being marketed solely to its clients as part of its post retail distribution review (RDR) strategy.
In a request for proposal and information pack sent out to fund groups and seen by Wealth Manager, Hargreaves said it plans to only offer ‘substantial promotional coverage’ to funds that make it onto its New Wealth 150 and concentrated Core Funds list.
The UK’s largest direct to consumer platform said it did not expect better pricing to be offered to others in its market, given its distribution, viewing ‘better prices as the “new discount”’ in a commission-free world'.
Noting the options available to fund groups in terms of share classes, it said a Hargreaves Lansdown specific share class with its own pricing was preferable.
It said a second option was to offer a super institutional share class available to very few distributors, followed by a clean retail unit with a further discount to the client.
The firm also mooted the idea of offering certain funds exclusively to its retail client base, which it said could help to manage capacity issues and provide ‘competitive advantage'.
In what it describes as ‘less attractive’ options, Hargreaves suggested a Z share class with a 0% annual management charge where the platform is invoiced by the group, although it said this could present challenges over how charges would be collected from consumers.
Although the firm objects to HMRC’s move to tax rebates, it noted that ‘a taxed discount is also better than no discount’, so it will entertain rebate solutions.
Hargreaves has set a provisional date of January 2014 to stop promoting investment into retail units, at which point new monies will be allocated to clean units.
The platform said it is not planning to convert retail units into clean units in bulk, but from that date clients would have the opportunity to convert. The same platform tariff will apply to all clients irrespective of what unit they hold, so clients in trail-paying units could expect to receive a larger rebate. Hargreaves does not expect initial charges to be applied to commission-free funds, or if so to be fully discounted.
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