This interchange of descriptions appears to be increasingly common when looking at super clean units – more on these in a moment. For units to be described as clean, even when the rebate is reinvested for the client, has the potential to add further confusion. The challenge for advisers is getting behind the jargon and understanding what is actually being described and what the implications are for their clients.
Put simply, super clean is a version of clean with a lower cost, issued under a different share class which is not available to every platform provider.
Another challenge is that the lower cost is sometimes derived from fund managers providing a larger rebate, which is reinvested – so not clean in my eyes – and which opens itself up to potentially greater levels of HMRC tax.
So even a ‘clean’ share class in the eyes of one platform may not be ‘clean’ in the eyes of another if they have secured a rebate.
Without a consistent naming convention for share classes, fund managers will continue to choose their own – retail, A, platform, X, institutional, W and more – so care needs to be taken when selecting funds. Having new share classes, essentially new funds, may impact an adviser’s review process as there will be limited historical pricing.
It is important therefore, for advisers to ask how platforms are dealing with rebates, super clean and the like, as it is clear terms used across the industry by different people mean different things. When carrying out due diligence, be sure to ask questions around share class strategy.
Alistair Wilson is head of retail platform strategy at Zurich UK
