Back in the day, when I was learning how to sell endowments and transparency was the stuff of a madman’s dreams, I was coached to describe the charging structure as a ‘shopping basket’ of charges. This masterstroke of metaphor was intended to neatly sweep away the complexity of initial units, allocation rates, policy fees, AMCs, exit penalties and so on.
And yet, strangely, clients’ eyes still glazed over as I plunged on with increasing desperation explaining just why it was a good idea for XYZ Life to have it away on their toes with Â£2.26 a month out of a Â£30 premium for the privilege of a direct debit.
We’ve come a long way since then. Or have we? Anyone involved in the wrap and platform market knows how difficult it is to pick apart the charging structures of our new-world, open, client-centric propositions. We might not call them the same things, but if we put ourselves in clients’ or even IFAs shoes for a moment, we’ve still got a way to go.
With all this baggage, you’d expect me to a) be in favour of bundling and b) be pretty happy with the FSA’s CP10/29, in which they state:
We have decided not to propose changes that would require product charges and platform charges to be separated (i.e. bring an end to bundled charging). Instead of this, we propose still to allow fund managers and other product providers to make payments to platforms for the administration services they receive, subject to improved disclosure of the payments to consumers and impartiality in the presentation of products.
(source: FSA CP10/29, p.18)
So, to be clear, what we’re saying is that as long as the behind-the-scenes stuff is explained to customers, then we’re fine. Well, I’m not so sure. There’s a world of difference between bundling in terms of presentation and working on an implicit, opaque model that is predicated on customers not understanding what’s going on.
I can’t wait to hear what metaphors we come up with for shelf space fees, rebates, marketing packages, retrocessions and all the rest.
I’m offering a prize, the traditional packet of Rolos – for the best one. Leave your answers below!