We’re seeing a slow rise in the use of clean share classes across Europe, challenging the existing business models of many platforms. And, unfortunately, we can’t look to the UK for a hint of where we’ll end up. While clean share classes are more or less ubiquitous in the UK, platforms are not allowed to charge asset managers, so the commercial models are very different.
Under the existing continental European rebate model there is little apportioning of platform charges across the value chain. Asset managers get ‘distribution’ and advisers/wealth managers/banks etc. get ‘access to investments’. But all the fees come from the same bucket, so there’s little need to state the explicit value exchange that each party makes with the intermediary platform.
Platforms across Europe are trying to replace rebates with explicit fees to asset managers, charged on top of clean share classes. This is leading asset managers to question exactly what they get for the fees they pay, and so platforms are now falling over themselves to evidence the service they provide to the asset managers – hence the launching of various platform data services in recent months.
Asset managers’ charges are ultimately on an annual percentage of assets. If the service for which platforms charge asset managers is ‘distribution’, then platforms will need to articulate clearly what the asset managers can expect to get in return – especially in terms of fund sales.
European platforms don’t provide asset managers with ‘shelf space’, just the potential to distribute. We therefore expect asset managers to become a bit more choosy when deciding which of their products to list on the various platforms.
As an aside, it’s hard to envisage the same share classes becoming available rebate-free in the UK but subject to platform rebates on the Continent. Asset managers will be very reluctant to absorb an additional 10bps for continental distribution.
We cover this and more in our new report – European Fund Distribution: Platforms – which we will publish on Monday. What are we seeing in the platform market? How are platforms impacting fund distribution across Europe? Where do we see the market going? Get in touch for more information.