Wrap, The Regulator, The Taxman, and "Clean" Share Classes


There is a lot going on in the wrap/platforms industry! Fund “Rebates” are a method of passing on discounted terms Standard Life have secured with Fund Managers (as a result of their significant buying power).  Some other wraps/platforms also do this.

The Regulator, the Financial Conduct Authority, has moved to ban these “rebates”, preferring transparency, so that wrap/platform charges are separated out from investment costs.

The taxman, HMRC, decided in March to tax any rebates clients receive from 6th April 2013 (as income).  We expect the impact of this to be limited to “Personal Portfolio” only, and to be recorded on the annual wrap Tax Statement.

So wrap/platform providers have decided to stop rebates, which means there will be nothing for the HMRC to tax (after 6th April 2014)!

Instead, wrap/platforms will show their charges separately (as opposed to being “bundled” together with the investment fund charge), and so there is now a new range of “clean” share classes emerging with much lower Annual Management Charges (AMCs), typically 0.75% as opposed to 1.5%.  Standard Life Wrap hope to use their “clout” to reduce this cost to approximately 0.65% p.a., in order to maintain their competitive edge over rivals, and negotiations continue ...

These funds may then have “preferential” or “super clean” share classes, i.e. with bigger investment discounts for Standard Life Wrap investors.

Between the Regulator and the Taxman, the excellent development of wraps is in danger of becoming overly-complex.

We predict more changes over the coming year to eighteen months as everyone reacts to the need to eliminate the HMRC’s impact upon our investments.

Watch this space!

Find out more about our ASPL Wrap - Making your money work harder for you.

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Adrian Smith

Chartered Financial Planner
Chartered Wealth Manager

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