LONDON--(BUSINESS WIRE)--Northern Trust (Nasdaq: NTRS) today shared the results of a survey conducted among 30 of its fund manager clients attending a recent breakfast workshop entitled “Are you ready for the UK Retail Distribution Review”.
The event, which discussed the potential implications and opportunities for the UK funds market, was held at Northern Trust’s Canary Wharf offices and attended by selected Northern Trust fund manager clients across the UK and Ireland who will be affected by the Retail Distribution Review (RDR).
RDR focuses on independent financial advisers and platforms, although all fund managers will need to review their product offering and make changes to accommodate the regulation, which is due to radically change the FSA’s Conduct of Business rules. From 2012, commissions on product sales will be prohibited and, instead charges for the advice provided to the client by the advisor must be agreed and paid for by the client. This means a client can opt to pay for the advice independently of the product or from the product itself, radically affecting fund managers.
“The RDR, due to come into force 31 December 2012, will affect any fund distributed in the UK to retail investors, with managers needing to consider their distribution channels, asses changes and determine what services they want to offer to IFAs and investors,” said Karen Hamilton, head of fund administration product development (EMEA), at Northern Trust. “Fund promoters will, as a result, need to assess the impact to their distribution chain, as well as any required technology enhancements and potential changes to their distribution strategy and fund range.”
“While it seems clear that the majority of fund managers we surveyed (74 percent) have considered the impact of RDR and are actively working on adapting their business’ accordingly, they see a diverse number of challenges affecting the implementation of the RDR,” she added.
Share classes and pricing
Respondents expressed concerns around share class launches and the inconsistency between the UK and European (where commission can still be charged) share class models. Sixty eight percent planned to launch 1-3 additional share classes, while 21 percent said they were not planning on any new launches.
While 60 percent of respondents envisaged their pricing model for clean-fee share classes (called for under RDR) would be between 75bps-100bps, 25 percent still remained undecided and listed reviewing the level of charging on existing share classes and pricing models, a challenge.
Platforms
Around 56 percent of respondents envisaged an increase in the amount of business through distribution platforms, but saw keeping them happy as a challenge, alongside tracking trail commission and the issues of rebate fees.
“There is no doubt that fund promoters need to start planning their response to the RDR now in order to capitilise on opportunities presented in a rapidly changing investment market,” said Hamilton. “At Northern Trust, we can support our clients with the RDR, helping them launch new share classes, re-register platform holdings, calculate unit rebates, and maintain their legacy business.”
Northern Trust’s Global Fund Services business provides custody, fund administration, investment operations outsourcing, and ETF solutions to investment managers across the globe and across the spectrum of asset classes. It is actively working with all its fund manager clients to support their changing requirements, in line with regulatory change and developments.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2011, Northern Trust had assets under custody of US$4.3 trillion, and assets under investment management of US$662.9 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.
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