RLAM fixed fee model unlikely to sway fund buyers

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29 March 2019

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Royal London Asset Management’s changes to its charging structure have been described as less radical than Fidelity International’s introduction of fulcrum fees and unlikely to influence fund buyer decisions.

From 3 June, the asset manager will move to a single fixed charge named the “fund management fee” or FMF and drop its ongoing charge. Assets under management and future expectations of costs for funds informs the FMF rate.

In a press release published on Friday morning, RLAM said the new fee would be clearer and simpler for investors to understand, unlike the OCF, which can vary month to month.

However, it admitted most funds would see a slight increase in cost. The change applies to RLAM’s multi-asset, equity and bond unit trusts. Transaction costs will be disclosed separately.

In total, around 30 funds will become more expensive for investors. Among the handful of funds that become cheaper, Royal London International Government Bond enjoys the biggest price cut, falling 19 basis points to 0.30%. The European Corporate Bond falls 10bps to 0.30%. Most of the other fee changes were no larger than plus or minus three basis points.

Fidelity fee changes have failed to shape flows

Fidelity delivered a much more radical approach to fee structures when it adopted a sliding fulcrum fee, said Tilney managing director Jason Hollands. Even still, Hollands said the evidence there is that it has had very little impact on buyer behaviour.

He added: “I think most advisers will judge this on a product by product basis and ask themselves whether the costs appear reasonable for the performance being delivered compared to rival products elsewhere. I don’t see slight nuances in calculation methodology driving the thinking of fund selectors in itself.”

Simplicity should be welcomed

Chelsea Financial Services managing director Darius McDermott welcomed the simplification of the fee structure. “Where fees are going down is to be applauded and where they haven’t managed to lower them that’s obviously a shame,” McDermott said.

Dropping funds’ OCFs for simpler structures could be the direction of travel, he said.

RLAM chief distribution officer Rob Williams (pictured) said: “Our customers want a better understanding of the cost of managing their funds, and the new fixed Fund Management Fee does that – it provides them with both clarity and certainty. We will continue to monitor the fee levels to ensure our funds remain competitively priced while still providing excellent value for money.”

Royal London Bond Funds ICVC

Fund Name and Relevant Share Class	Current OCF	Fund Management Fee
Royal London Cash Plus Fund
Class M	0.27%	0.25%
Royal London Short-Term Money Market Fund
Class Y	0.09%	0.10%
Royal London Corporate Bond Fund
Class M	0.53%	0.56%
Royal London Duration Hedged Credit Fund
Class Z	0.55%	0.56%
Royal London Enhanced Cash Plus Fund
Class Y	0.17%	0.18%
Royal London Ethical Bond Fund
Class M	0.54%	0.55%
Royal London European Corporate Bond Fund
Class Z	0.40%	0.30%
Royal London Global Index Linked Fund
Class M	0.50%	0.50%
Royal London Index Linked Fund
Class M	0.32%	0.36%
Royal London International Government Bond Fund
Class M	0.49%	0.30%
Royal London Investment Grade Short Dated Credit Fund
Class Z	0.23%	0.24%
Royal London Cautious Managed Fund
Class A	0.69%	0.70%
Royal London Short Duration Credit Fund
Class M	0.33%	0.35%
Royal London Short Duration Gilts Fund
Class M	0.29%	0.29%
Royal London Short Duration Global Index Linked Fund
Class M	0.26%	0.27%
Royal London Sterling Credit Fund
Class M	0.50%	0.53%
Royal London UK Government Bond Fund
Class M	0.44%	0.45%

Royal London Bond Funds II ICVC

Fund Name and Relevant Share Class	Current OCF	Fund Management Fee
Royal London Ethical Bond Fund II
Class M	0.54%	0.55%
Royal London Short Duration Credit Fund II
Class M	0.33%	0.35%

Royal London Equity Funds ICVC

Fund Name and Relevant Share Class	Current OCF	Fund Management Fee
Royal London FTSE 350 Tracker Fund
Class Z	0.12%	0.13%
Royal London Emerging Markets ESG Leaders Equity Tracker Fund
Class Z	0.30%	0.35%
Royal London UK Equity Income Fund
Class M	0.68%	0.72%
Royal London European Opportunities Fund
Class M	0.73%	0.75%
Royal London European Growth Fund
Class M	0.65%	0.70%
Royal London Europe ex UK Tracker Fund
Class Z	0.23%	0.25%
Royal London Asia Pacific ex Japan Tracker Fund
Class Z	0.26%	0.30%
Royal London Global Equity Diversified Fund
Class M	0.38%	0.41%
Royal London Global Equity Select Fund
Class M	0.67%	0.71%
Royal London Japan Tracker Fund
Class Z	0.24%	0.25%
Royal London UK Mid Cap Growth Fund
Class M	0.75%	0.77%
Royal London UK All Share Tracker Fund
Class Z	0.14%	0.15%
Royal London UK Equity Fund
Class M	0.65%	0.67%
Royal London UK Dividend Growth Fund
Class M	0.65%	0.71%
Royal London UK Smaller Companies Fund
Class M	0.72%	0.77%
Royal London UK Opportunities Fund
Class M	0.72%	0.77%
Royal London US Tracker Fund
Class Z	0.23%	0.25%

Royal London Multi Asset Funds ICVC

Fund Name and Relevant Share Class	Current OCF	Fund Management Fee
Royal London GMAP Adventurous Fund
Class M	0.60%	0.60%
Royal London GMAP Balanced Fund
Class M	0.65%	0.60%
Royal London GMAP Conservative Fund
Class M	0.65%	0.60%
Royal London GMAP Defensive Fund
Class M	0.60%	0.60%
Royal London GMAP Dynamic Fund
Class M	0.62%	0.60%
Royal London GMAP Growth Fund
Class M	0.62%	0.60%
Royal London Monthly Income Bond
Class M	0.55%	0.55%
Royal London Multi Asset Strategies Fund
Class M	0.55%	0.55%