Skandia has called for the inclusion of ongoing transaction charges such as fund switches in the platform disclosure regime to stop clients being misled.
In its response to the FSA’s platform discussion paper, Skandia says the current disclosure regime focuses on charges at the point of sale and does not cover the entire range of consumer charges – such as fund switches.
It also says firms should not be permitted to refer to annual management charges without referencing the higher total expense ratio (TER) amount.
Skandia says the lack of standardisation can confuse advisers and clients, especially as switch charges appear insignificant.
Its figures show for a £100,000 portfolio, of which a third of the funds are being switched each year, the charges would reduce the fund value by £6,398 over a 20 year term based on 7% investment growth, 1.5% annual charge and 0.25% switch charge.
Skandia says switch charges are becoming increasingly common and must be factored into product disclosure and should apply to all investment products, not just platforms.
Skandia marketing head Billy Mackay says the FSA’s discussion paper is an “excellent opportunity” for the industry to agree best practices.
“Key to this is to ensure that disclosure practices are consistent between platforms and packaged products whilst at the same time improving on the current disclosure regime,” he says.
“This will enable advisers and their clients to make fully informed decisions on the products and services appropriate to their needs.”
To comment on this story, contact:
0207 034 2681
Less environment, more governance threatens to undermine firms' green credentials
Evidence your compliance
Quarter of single pensioners dependent on state