RDR & Wrap Platforms

Early signs for fund platforms post RDR are positive in terms of increasing assets under management.  Hargreaves Lansdown in particular reports record quarterly inflows of £1.8bn in the three months to 31 March 2013.  HL is also confident about the effects of the upcoming Financial Conduct Authority paper on platforms, which some fear will bring an end to rebates for investors.  Under the new regime post RDR, it is currently unclear as to whether rebates of trail commission are taxable income to the investor or purely a reduction in charges.  The FCA may opt to ban such cash rebates, whilst HMRC may opt to treat them as taxable if they are allowed.

One solution is for fund management companies to offer "clean share classes" which have stripped out most of the commission, thereby reducing the amount of potential rebate.  Recent evidence suggests that this is the way that the industry is going, with Axa Wealth recently reporting that 40% of flows on its Elevate platform in March were into clean share classes.

Given the relative volume of investment fund business now being processed via platforms, this will be one of the key industry issues for 2013.