What are 'clean' funds?

It is worth noting that these new share classes do not necessarily mean that a fund that used to cost 1.5% will now cost 0.75%.

It simply means that you can now see where your money is going rather than a bundled final amount.

Critics have pointed out that unbundled costs aren't always working out cheaper for the consumer.

Here are some examples from Hargreaves Lansdown showing that unbundled is not necessarily as cheap as bundled. In some cases they are cheaper.

£50,000 in a SIPP     Bundled      Unbundled   

 

£10,000 in each fund 

   

Fund AMC

 £457,00  £282,00
Platform AMC  £162,00  £162,00 
1 fund switch  £25,00  £25,00
2 fund top ups  £25,00  £25,00
Total platform cost   £212,00  £212,00
Loyalty bonus  £187,50  £0,00
Cost to client  £481,50  £494,00

 

 

 

 

 

 

 

 

 

£30,000 in an ISA   Bundled       Unbundled    

 

£6,000 in each fund

   
Fund AMC  £274,20  £169,20
Platform AMC   £48,00  £48,00
1 fund switch   £25,00   £25,00 
2 fund top ups  £25,00  £25,00 
Total platform cost   £98,00   £98,00 
Loyalty bonus  £112,50   £0,00
Cost to client  £259,70   £267,70

 

 

 

 

 

 

 

 

 

Here is an example:

The Artemis Income fund charges 1.5% for its bundled share class. The investor does not see this charge directly as it is reflected in the unit price.

Where this is held on a platform, Artemis refunds part of this charge to the platform to pay for the platform admin and to pay the adviser. Broadly speaking 0.75% is kept by Artemis, 0.25% goes to the platform and 0.5% goes to the adviser.

But Artemis Income's unbundled share classes are distributed to the investor at 0.75%. Note that the investor cannot buy at this price.

The platform and adviser will still charge their fee on top of the 0.75%, which in many cases brings the total cost back up to around 1.5%.

So, that would break down like this - 0.75% product cost, around 0.25% platform fee and then the adviser will also add in their charge on top on that. 

 

 

How do you tell the difference between clean funds and the old ones?

There is no typical system in place that signals to investors whether something is in the new cleans share class or not.

If you use an adviser or platform, they will identify this for you. If you deal directly with a fund manager, they will be able to tell you this.

An online broker will state ‘No trail' or the word ‘Clean' will appear alongside the name of the fund.


 

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