That is why the intended launch of its semi-clean ‘R’ (retail) share class in January next year is disappointing.
The share class is ‘semi-clean’ because while it strips out trail commission (a requirement under FSA guidelines from 1 January) it still bundles in the 0.25% of the AMC widely associated to be the portion rebated to platforms.
If, as is widely expected, the FSA’s final guidance on platforms bans rebates from 1 January 2014, M&G will be joining Fidelity in having to eat humble pie and adopt a totally clean share class across both retail and institutional share classes.
Both fund houses argue they currently offer an unbundled share class to those who have been asking for it (institutional investors and discretionary wealth managers) but only if they invest £500,000 or more.
They suggest IFAs still want to use platforms and prefer the 1% share class which has a rebate to platforms built in.
But it’s not exactly in the spirit of RDR – intended ultimately to increase transparency for the end investor – is it?
M&G should lead by example
Prior to its toppling of Invesco Perpetual earlier this year, M&G had not topped the “biggest fund groups” table since 1998.
Ranked tenth in terms of retail and institutional assets under management in August 2008, according to IMA figures, M&G overtook Fidelity in December last year and finally hit the top of the table in April, knocking Invesco Perpetual out of a position it had held since 2007, when Fidelity was last top dog.
Fidelity has tended to rely more heavily on institutional flows, so it makes more sense for it to offer preferential treatment to those large investors.
But M&G’s double standard for institutional and retail investors is more surprising because of its popularity with the latter.
While flexibility may be the watchword for both the firms until the issue of rebates is finally resolved, I can’t help but question their motives.
Is that flexibility a way of allowing them to continue cutting deals with platforms until they are prevented from doing so in an opaque manner by FSA guidelines?
If this is the case then neither firm is techincally doing anything wrong. It’s just a shame that as retail investors’ consistently favoured fund group M&G is not repaying their loyalty in kind.
