Bundled share classes have also only seen “modest fee trimming” post-RDR and in some cases have raised prices, a report by Morningstar has revealed.
Under RDR financial advisers and platform providers were required to charge clients upfront for their services rather than accepting sales commissions from product providers.
While most investors have been moved into commission-free clean share classes since the rule change in January 2013, Morningstar noted many remain concerned that advisers and asset managers are dragging their feet on making the switch to keep their fees obscured.
Active equity funds slow to drop fees
The Morningstar report found that fees on bundled active equity funds had dropped less than 10% in the last five years.
UK Equity Income funds saw the biggest decline in their fees, down 7% from 160bps to 148bps over the period. This was followed by UK Large Cap and Japan Large Cap, which fell 6% to 141bps and 5% to 165bps respectively.
Fee reductions in clean share classes of active equity funds were steeper on average though still mostly in the single digits (%).
Global Small Cap saw the biggest chop to prices with fees falling over one fifth from 97bps to 76bps.
US large cap, one of the asset classes under the most pressure from cheap passive competitors was the second biggest faller, with fees dropping 13% from 96bps to 84bps.
Fixed income passives lag equities for dropping fees
However both clean and bundled share classes of active equity funds saw a significantly lower drop in fees than their passive competitors, most of which sliced fees by double digits.
One exception was fixed income where both active and passive providers were less aggressive on price cutting. Although passive funds in the clean and bundled share classes saw a steeper cut in prices, the divide was not as great as it was across equity funds.
Four clean share asset classes of active funds, including Global Emerging Markets hard and local currency and US High Yield, actually saw their fees go up in the five years post-RDR.
Bundled share classes of active bond funds were even higher after RDR in most cases, with US High Yield up 23% and GEM local currency up 20%.
Investors yet to fully benefit from RDR changes
Jose Garcia-Zarate associate director of manager research at Morningstar said the findings demonstrate “the market still has further to go” post-RDR, particularly in fixed income.
In general the average fee for an actively managed bond fund has fallen 10% since 2013, whereas passive bond funds have seen fees dip just 4%.
The report said active equity funds have cut fees by a quarter since RDR, though this was less than passive funds which cut costs by nearly one third (28%).
Moving forward Garcia-Zarate said it was in the best interest of investors to transfer them out of “expensive bundled share classes which are eating into their returns”.
“There is no doubt that the RDR has influenced the marketplace positively. There is greater transparency of fees for the investor and this has brought to the fore the issue of the assessment of value at a fund level. However, there remains much work to be done for all retail investors to benefit fully from the legislation.”
