The unbundling of platform charges will result in greater price competition between fund providers, the Financial Services Authority (FSA) said today.
In its consultation paper, the watchdog said it would be "surprised and disappointed" if the unbundling process - whereby the fund, platform and adviser charges are separated - did not lead to falling fund prices.
The FSA also said the move towards clean share classes will result in greater pressure being applied to the headline price of retail funds.
"With the introduction of clean share classes, advisers would find it difficult to justify recommending funds that are priced at a significantly higher level," it said.
"The competition analysis research (conducted by Deloitte on behalf of the FSA) has indicated that our policy proposals are likely to lead to greater price competition.
"This should help to put pressure on providers that are reluctant to re-price their products as a result of the RDR changes."
Today the FSA confirmed its intention to ban cash rebates, making it more important for fund groups to introduce RDR-compliant share classes with adviser commission and platform charges stripped out.
In anticipation of the expected ban, several fund managers have already rolled out clean share classes with lower AMCs, typically 75 basis points.
The FSA also said its competition analysis suggests its platform proposals will improve consumer outcomes.
"In addition to increased pressure from consumers, there is likely to be stronger adviser pressure on prices in both the platform and fund manager market," it said.
"Platforms will need to justify their proposition to the end consumer more clearly than is the case at the moment, given that the consumer will know the cost of the platform service. This should lead to platforms focusing more on attracting consumers and on features that work for their benefit."
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