Investment - Articles - Institutional share classes could provide RDR answers

 Deloitte, the business advisory firm, says asset managers could offer institutional share classes to retail investors to comply with Retail Distribution Review (RDR) rules.

 FSA confirmation that commission on legacy investments will be banned from January 2013 means fund managers will need to introduce RDR-compliant share classes that do not include the cost of adviser commission. Adapting existing institutional share classes for retail investors could be cheaper and simpler than developing new share classes.

 Eliza Dungworth, lead investment partner at Deloitte, said:

 “Fund managers will need to offer investors a factory-gate share class that strips out all adviser charges to comply with RDR. They could develop a new share class but the costs will be high; fund managers, for example, will need to seed the new share class, register the classes and publish a simplified prospectus and key information documents. The costs could be prohibitive, particularly if repeated across a large number of retail funds. Rather than meet the high costs of developing new RDR share classes, fund managers are looking at adapting institutional share classes for retail investors.”