Six of the 14 platform groups that Portfolio Adviser reached out to said they had finished distributing all their ex-post disclosure statements to clients. Aberdeen Standard Investments’ platform business Parmenion said it began writing to clients as early as mid-February.
Investment firms and platforms are required from this year to provide their clients with ex-post information on total costs and charges annually. Article 50(2) of the Mifid II Delegated Regulation states that costs and charges must be expressed as both a cash amount and as a percentage.
Several firms, including FTSE 250 group AJ Bell and Alliance Trust Savings, expect to be working all the way up to the deadline on 30 April, while larger players like Aegon and Fundsnetwork have weeks to go before all clients receive their communications.
|Platform||Status on Mifid ex-post charges disclosure|
|Aegon||Has begun contacting clients in batches|
|AJ Bell||Expects to send ex-post disclosure by 30 April|
|Alliance Trust Savings (ATS)||Working toward 30 April deadline|
|Ascentric||Report has been sent to clients|
|Aviva Platform||Did not hear back from|
|Bestinvest||Did not hear back from|
|Elevate (Standard Life)||Annual costs have been posted or uploaded to accounts for clients that have opted for paperless communications|
|Embark||Did not hear back from|
|Fundsnetwork||Has begun mailing clients and should complete the process in the next month|
|Hargreaves Lansdown||Annual costs included in spring statements released in May|
|Interactive Investor||No date set|
|Nucleus||Made available to all clients before 30 April deadline|
|Parmenion||All annual charge statements issued to clients|
|7IM||Ex-post charges included in each quarterly portfolio valuation since Q4 18|
Source: Portfolio Adviser
The rules are crystal clear
But SCM Direct co-founder Alan Miller notes that even firms that are producing the statutory documents are flouting the rules.
A Fundsnetwork annual costs and charges summary for 2018 seen by Portfolio Adviser gives a breakdown of costs and charges in pounds and pence but does not express these figures as a percentage despite this being required under Mifid II.
Earlier this year the Lang Cat checked in with advised platform providers to suss out how prepared they were for the first year of ex-post disclosures and to find out how they would be reporting DFM, advice and investment fees. Every other firm apart from Fundsnetwork said they would express charges in both cash and as a percentage.
“The rules are crystal clear,” says Miller. “How can firms as large as Fidelity with extensive compliance and legal teams get such a statement so wrong and how can the FCA choose not to enforce the law?”
A spokesperson for Fundsnetwork told Portfolio Adviser that the FCA has fully reviewed its annual charges documentation and “are happy with it”.
They added that the letter to clients does highlight both the realised growth rate of assets net of fees and what the growth rate would have been without any charges, with the difference being the percentage costs.
Platform giant Aegon lumbers behind other rivals
The Fundsnetwork spokesperson said it should complete the ex-post process “in the next month or so”.
The UK’s largest advised platform Aegon said it was “on course” to begin issuing costs and charges statements in April in a reply to Portfolio Adviser last week. Statements will be distributed in phases over “a number of weeks” in order to avoid overwhelming advisers.
“This is a large undertaking and we are mindful of the impact issuing all statements at once may have on advisers’ businesses,” an Aegon spokesperson said. “In future, the 2019 costs and charges statement will be sent with client’s first quarterly statement of 2020.”
The Lang Cat consulting director Mike Barrett says the fact Aegon is mailing its ex-post statements in batches is a smart approach.
“The last thing they want to do is send out a million letters on one day and suddenly get a million phone calls the next day,” he says. “Everyone knows how stretched Aegon’s call centre got last year with the re-platforming so it’s entirely sensible to spread it out.”
While Barrett thinks the platform providers are generally doing a good job when it comes to getting up to speed with new procedures under Mifid II, he worries that advisers will still require a degree of hand holding.
“The conversations I’ve had with advisers makes it very clear that a lot of advisers will need a bit of hand holding to be able to explain to their clients what these statements are, how they’re working and what’s going on,” says Barrett. “I would hope the platforms are going to do that over the coming weeks as well.”
Platforms prioritising ‘glossy factsheets’
Platforms have also been accused of not being as transparent as they could be when it comes to disclosing the total costs of the products sold on their sites. Since Mifid II came into play on 3 January 2018 fund providers are required to list the ongoing charges figure in addition to all transaction and trading costs, which were previously hidden.
All 14 platform groups Portfolio Adviser spoke to said they hold data on the transactional and incidental costs on their website.
But Sunil Chadda, Transparency Taskforce ambassador, claims platforms are guilty of prioritising the lower non-Mifid costs on their sites and make it easier for clients to navigate to the less regulated, “glossy and welcoming” fact sheets.
Even D2C giant Hargreaves Lansdown, which Chadda thinks is “the best by a mile” in terms of listing the total costs under Mifid, could be much clearer at explaining its charges.
Users who are researching a Ucits fund on Hargreaves’ site are taken to its ‘At a glance’ landing page, which contains the OCF and any discount available to Hargreaves customers, below which sits a Key Investor Information Document (Kiid).
A ‘Costs’ section is found several tabs to the right. It provides a more detailed fee breakdown, including an ‘average annual charge figure’, a non-standard industry term which encompasses the OCF, Hargreaves’ management fee and any transaction costs. The AAC is expressed as a percentage and charges are based on an investment of £5,000 within a Stocks and Shares ISA over five years assuming 5% growth.
Hargreaves told Portfolio Adviser it has tried to make a clear distinction between the ‘At a glance’ pages, which are deliberately “investment focused”, and the ‘Cost’ tabs because the investment OCF must be calculated differently to Mifid costs under Ucits rules.
The FTSE 100 platform group added that it makes fact sheets available because clients find them useful. “They often have the most up to date commentary by the fund manager – more up to date than the regulatory documents – although it is not intended or expected to drive decision-making,” a Hargreaves spokesperson said.