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Rating:Fidelity is First to Adopt Clean Fund Distribution in the U.K. Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, April 05, 2012

Fidelity is First to Adopt Clean Fund Distribution in the U.K.

News summary by MFWire's editors

What would mutual fund supermarkets look like if revenue sharing payments and platform fees paid from fund assets were forbidden? Well, just take a look at the U.K. to find out.

Thanks to new FSA regs in the United Kingdom, brokerage firms must "unbundle" their fees from those levied by funds.

This week, Fidelity became the first U.K. fund supermarket operator to meet the new rules when it updated pricing on the U.K. version of FundsNetwork. FT Advisor reported the move. Cofunds, a second supermarket, is expected to follow in the third quarter. And another, Skandia, plans to unveil its changes in the fourth quarter.

Fidelity FundsNetwork (U.K.) will charge account holders an optional 45 a year account fee for its unbundled option. Those who do not wish to pay the fee will be charged a 25 basis point "switching fee." Fidelity will reportedly take the fee each month by liquidating a portion of the account holder's largest fund position.

David White, head of FundsNetwork (U.K.), told the paper that: "It is clearly not for us to say whether an adviser should adopt a bundled or unbundled fund - that is their decision - and so it has always been important for us to offer both pricing options."

The new rules are part of the Financial Services Authority's Retail Distribution Review, commonly referred to as the "RDR", and take effect in 2013. The FSA is expected to include a provision in the RDR that will allow funds to make payments to distributors in the form of shares, but not in cash.

Meanwhile, the FT Advisor also reports that a pair of U.K. fund firms have launched "clean" shares to meet the coming RDR requirements. Those firms with clean shares are Schroders [profile] and BlackRock [profile]. Clean shares include no distribution charges.

Invesco Perpetual [profile] and MAM Funds are taking a different path. Both firms reportedly are prepping commission-free share classes with 25 basis point "bundled" platform charges.

The RDR is also opening the door for Fidelity to offer exchange traded funds (ETFs) as part of its supermarket. The fund giant will place ETFs backed with physical assets on FundsNetwork this quarter. Before now, ETFs were not carried on the platform because their shares did not embed any platform fees. 

Edited by: Sean Hanna, Editor in Chief

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