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Funds under management up 14% at Skandia UK

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Skandia UK’s funds under management have increased to GBP34.5 billion at the end of Q1 2011, up 14% compared to the same time last year.  This significant increase in funds under management was driven by a combination of good investment returns and an increase in net client cash flow (net sales) of 5% to GBP554 million, up from GBP529 million in Q1 2010.

This strong growth was driven primarily by the Skandia Investment Solutions platform which saw funds under management increase significantly by 34% to GBP17.7 billion, driven by net client cash flow of GBP1 billion.  2010 saw the highest ever new business volumes in both monetary value and operation volumes on the SIS platform and these records were broken again in the lead up to the tax year end.  New records were set for investment switches and daily calls with over GBP50 million of gross sales being recorded on a single day towards the end of the tax year.

Skandia UK is well prepared for the Retail Distribution Review and is ready to develop its new charging structure as soon as the Financial Services Authority announces its decision on platform rebates.  Skandia has undertaken significant preparatory work and is now ready to develop its charging structure to accommodate either cash or unit rebates, depending on the FSA decision.
 
Cash rebates are the easy option and would be quicker and cheaper to implement, but Skandia is prepared to make the additional investment for the benefit of customers.  As part of the Retail Distribution Review the platform operator believes fund rebates should be seen as product discounts and credited back to the customer’s fund as units, rather than as cash into their cash account.  Investors use platforms to invest in funds, not cash, so it follows that a discount should be credited back into the fund rather than the cash account.
 
From a customer perspective cash rebates could create confusion around exactly how much they are paying for both the platform and advice.  This is because the platform charge and advice costs can be automatically deducted from their cash account which is funded by rebates rather than the investor.  Even when fully disclosed, there remains a real possibility that investors could think their platform and advice costs are paid for by the rebates they receive.  This is much closer to the current commission regime than it is to the new adviser charging regime.
 
Peter Mann (pictured), chief executive at Skandia, says: “2010 was a record year for Skandia UK and that momentum has carried through into the first quarter of 2011.  We are seeing significant demand for our platform services and we believe this is set to continue as advisers evolve their business models in preparation for the new adviser charging rules that require customer focused investment services with clear and straightforward charging structures.
 
“The Retail Distribution Review is all about improving outcomes for customers and platforms are set to be the dominant distribution channel for long term investments following the RDR.  It is therefore crucial that the platform consultation, and particularly the debate around rebates, produces an outcome that is genuinely in the best interests of customers.  
 
“Customers use platforms to invest primarily in portfolios of mutual funds.  If the platform can negotiate a discount for them with the fund group, I can’t see why that discount would not be credited back into the fund they originally chose to invest in.  Rebating the product discount as cash which could then potentially be used to offset the platform or advice charge sounds very like commission to me and flies in the face of the adviser charging rules which are perhaps the most significant change the RDR will introduce.”

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