The Royal Commission needs to take a closer look at platform shelf-space fees which remain problematic and have adverse implications for consumers, according to major fund manager, Platinum Asset Management.
In a submission filed with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Platinum described the shelf-space fees charged by platforms as probably a breach of a trustee’s common law duty not to profit from the trust.
As well, Platinum has placed shelf-space fees in the same basket as grandfathered commissions, arguing that volume-based shelf-space fees grandfathered under the Future of Financial Advice (FoFA) arrangements “should be phased out as soon as practicable”.
It claimed that platform operators “have essentially evolved to become a gateway for third party fund managers to access retail investors”.
“While the selection of external investment products for inclusion on investment menu(s) is largely driven by adviser demand, Platform Operators’ selection decisions may, to some extent, be influenced by their commercial relationships with Third Party Fund Managers, rather than being solely based on the calibre of a Third Party Fund Manager and its track record,” the Platinum submission said.
It said the payment of platform shelf-space fees by a third party fund manager to a platform operator was not appropriate “if the Third Party Fund Manager is not receiving a genuine service or the fee paid is not commensurate with the service being received, particularly if the amount of the fee and the related services are not explicitly, consistently and transparently disclosed by the Platform Operator to its investors”.
“Accordingly, shelf-space fees are only appropriate if they reflect the value of the services provided and are explicitly, consistently and transparently disclosed by the Platform Operator to its investors,” the Platinum submission said. “As such, fees that are not commensurate with services provided are not appropriate and should not be permitted.”