The fund platform industry has let advisers and clients down by not enabling free switching within an individual platform, Shaun Sandiford believes.
Sandiford, the James Hay regional sales director, says the impact of the recent market turbulence on many funds has been compounded by platforms charging switching fees.
He believes the high level of recent switching activity has exposed an unnecessary evil in the industry.
“At the moment it is just a bit mad out there, it’s not really a flight to quality, but a flight to cash,” Sandiford says.
“We are finding, especially in our smaller SIPP clients, about 30% of the portfolio invested in cash."
Sandiford says James Hay is one of the few providers which offers free switching on its wrap and SIPP platforms.
“The problem is not the run to cash, but some platforms will charge clients 25 basis points to move to a cash fund, and then charge them 25bp again when they are ready to come back into the market,” he says.
“I bet it has caught many clients by surprise and people need to understand the fine print on these things.”
Cofunds communication consultant Dick Eats says the level of fund switching on the platform averaged about 3% in recent years, but last year switches hit roughly 8%.
Earlier this week Cofunds, which offers free SIPP switches, announced its temporary Cash Reserve facility has seen more inflows than any fund on the platform in 2008.
“As we go further along it was natural to expect switching to increase, but there certainly was higher activity last year and this year we would expect it to be even greater,” Eats says.
Fidelity FundsNetwork stats released last night showed its Cash fund topped SIPP inflows in the first two months of 2008.
Rob Fisher, FundsNetwork sales and marketing head, says there is also evidence of ISA investors switching into its new cashpark facility.
“Over the last six months switching volumes have increased, although levels continue to vary month by month, suggesting investors and advisers are monitoring market trends quite closely,” he says.
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