RDR demands “at least three” share classes, Deloitte claims

Investment managers will need to have at least three share classes in the post-retail distribution review (RDR) world, according to Deloitte.

The business advisory firm warns that investment funds could become increasing complex for companies to operate and stresses the need for asset managers to start making changes as soon as possible ahead of the review’s implementation on December 31 next year.

Fund managers will have to have one share class for pre-RDR business, which includes the cost of advice. Another with factory-gate pricing and no adviser remuneration included will be needed, while a third that includes a platform charge will be required, the group claims.

Andrew Power, lead RDR partner at Deloitte, said: “Although no investment manager wants to have a huge number of share classes, we expect at least three may be required – and that will introduce significant operational complexity.”

He also notes that many asset managers are waiting until the Financial Services Authority (FSA) publishes its updated platform paper before deciding how to change their business but urges them to act now.

Power added: “Given the time available to make changes to systems and operations, investment managers can no longer wait until the FSA’s position is crystallised.”

He also predicts that the RDR will encourage a number of changes in the offerings of asset managers, suggesting they may merge similar funds to reduce their overall number of share classes and ease the administrative burden.

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