The Investment Association announces new approach to identify primary share classes

The Investment Association, in conjunction with leading data providers (Financial Express, Lipper, Morningstar), today announces plans to facilitate a move to a new primary share class in the post RDR environment. This will be the highest charging unbundled share class – free of any rebates or intermediary commission – which is freely available through third party distributors in the retail market. After a collection and test period, a date will be announced to make the transition.

The introduction of RDR introduced a number of challenges for the presentation of performance data, due to the increase in different share classes available for each fund. The conclusions published today intend to ensure that there is a consistent approach by the industry to choosing the primary share class that the data providers can use to prepare and present performance information to financial advisers and their clients via ranking tables and sector averages.

The paper also addresses the issue of historic track records as most RDR share classes have only been in existence since late 2012. The guidance on this remains the same as that set out in 2012 in that post RDR share classes should take the track record of pre RDR bundled retail share classes, without lowering the fees as this would not accurately represent the consumer experience.

Jonathan Lipkin, Director of Public Policy at The Investment Association, said:

“It is important for there to be a consistent basis available to retail consumers and their advisers to compare funds. There are no easy answers but the route being announced today is intended to reflect the most common consumer experience.”

The Investment Association also sets out:

• How the three leading data providers will change the share classes that they use to calculate the Investment Association sector averages once they have collected and tested the data based on the nominated primary share class, which fund managers will need to identify to the data providers using the specified template by 27 March 2015.
• How there will be full transparency in the process – the list of primary share classes used by the data providers for the calculation of the Investment Association sector averages will be made publicly available on The Investment Association website. Data providers are encouraged to make available their methodology for calculating the sector averages, if not already doing so.
• The details of how the process will work in practice.

A copy of the full paper is available to download here.