Many of our clients hold investment funds on the Ascentric platform.
This blog explains the steps Ascentric will be taking over the next few months to convert retail share classes into clean share classes.
But first, a brief explanation of the difference between ‘retail’ and ‘clean’ share classes.
Retail share class funds include three components of charge within the annual management charge (AMC).
For a typical 1.5% AMC, 0.75% is paid to the fund manager, 0.5% to the adviser and 0.25% to the investment platform.
This structure has worked well for our clients in the past, as a cash rebate of typically half of the AMC was paid to the cash account on the platform, which was then used to pay for platform administration and advice.
However, from April 2013 HMRC started taxing these cash rebates as income and they will be banned entirely for all clients receiving advice from April 2014.
What clean share class funds do is only charge for the fund manager annual management charge, so typically 0.75% in the example above.
The cost of platform administration and advice is then paid separately, either from the cash account on the platform or directly by the investor.
Ascentric has opted to convert existing holdings in retail share classes to the lowest cost clean share class available. This avoids the cash rebate tax charge and places investors in the cleanest charge environment for the future.
The conversions will happen automatically over the period December 2013 to April 2014. Ascentric will undertake these conversions manager by manager and ISIN by ISIN.
There is no cost to the investor for this share class conversion and it should be a seamless process.
It is however important to avoid trading activity within 5 days of the date when each conversion is planned. We will coordinate with Ascentric to ensure that we know when each conversion is planned and that we are not recommending to our clients they rebalance their portfolios around that time.
If you have any questions about this share class conversion, please do speak to your Financial Planner at Informed Choice.
