committee to look at DISTRIBUTION SALES definitionS following growth of third-party channel
The IMA is reviewing its definitions of distribution sales channels as it cannot accurately categorise the source of its members' business .
A working group of six to seven people has been established and the committee is to be chaired by Jim Roberts, director of investment at Skandia, with the first meeting taking place early this month.
Problems have been escalating over what fund groups classify as retail or institutional sales and the development of fund supermarkets is making it difficult to establish what percentage of business is coming via them or direct from intermediaries.
In addition, growth in third-party sales via life products, the rise of multi-manger and the impact of the impending depolarisation regime have combined to make the existing definitions outdated.
The definition of distribution would seem to be one of admin rather than a commercial issue between groups but some believe it may grow in importance.
While fund supermarkets are currently trying to deal at one price across the board for providers, it is expected market pressures will cause this to change.
As third-party links and open architecture expands among the life companies, the size of retail assets a company has will become a greater tool to negotiate with.
If a group can show it has a higher amount in retail sales versus a competitor, it may be able to obtain more beneficial terms for the group. Highlighted in the recent Pridham report, a fund management group newsletter service, groups such as Credit Suisse, Jupiter, Newton and New Star are now classifying sales to third parties or via strategic alliances such as Skandia as retail rather than institutional sales.
The report points out that Threadneedle, M&G, JP Morgan Fleming, Axa, Liontrust, Framlington and SG Asset Management also include unitised insurance sales to third parties as retail. Fidelity, Halifax and Scottish Widows do not.
The IMA's current rules on classifying fund sales state that retail business is that received direct from the public, intermediaries, direct sales forces and from private clients.
Institutional business is defined as that which comes through unitised life funds, in-house insurance companies, pension funds and other, unspecified business channels.
While considering the inclusion of unitised life business as retail, the IMA committee is also to look whether a fund supermarket should be classified as an intermediary.
According to the IMA, on the one hand the answer could be yes because advice is offered, while on the other it could be no because the advice is not the primary revenue source.
The trade body is to looking at a number of possible splits. One includes a split of financial adviser, platforms, direct and private clients, while another option suggests the split consists of fee-based IFAs, commission based advisers, which include platforms, direct and private client.
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