Institutional share classes for retail investors will boost RDR

Offering institutional share classes to retail investors could help asset managers to comply with the Retail Distribution Review (RDR), Deloitte has said. The FSA has confirmed that RDR rules will outlaw commission on legacy investments from January 2013.

Deloitte, the business advisory firm, has suggested that adapting existing institutional share classes for retail investors could be simpler than developing new share classes.

Eliza Dungworth, lead investment partner at Deloitte, said: “Fund managers will need to offer investors a factory-gate share class that strips out all adviser charges to comply with RDR.

“They could develop a new share class but the costs will be high; fund managers, for example, will need to seed the new share class, register the classes and publish a simplified prospectus and key information documents.

“The costs could be prohibitive, particularly if repeated across a large number of retail funds. Rather than meet the high costs of developing new RDR share classes, fund managers are looking at adapting institutional share classes for retail investors.”

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