Fund supermarket Fidelity FundsNetwork has taken the initiative in moving towards a more transparent investment service, introducing disclosure of the commission payments it earns from sales of the 1,200 funds available through the platform.

The move comes in the wake of August’s Policy Platform Statement from the Financial Services Authority (FSA), which sets out the watchdog’s intention to enforce disclosure of platform fees when the Retail Distribution Review (RDR) comes into force at the end of next year.

‘We have seen increased interest from customers in the levels of fees that are retained by fund supermarkets,’ comments Ed Dymott, head of commercial at Fidelity. ‘We saw no reason to wait until the end of 2012 to disclose this information.’

The new regime means that direct investors with FundsNetwork who do not use an adviser can go online at www.fidelity.co.uk/fees to see just what proportion of the annual management charge (AMC) on their funds will end up with the fund supermarket each year. Typically AMCs are split 50:50 between the supermarket and the fund group, so on a common AMC of 1.5 per cent FundsNetwork would earn 0.75 per cent.

Where a financial adviser is involved, on the same example of a 1.5 per cent AMC the fund provider will typically take 0.75 per cent, FundsNetwork 0.25 per cent and the adviser 0.5 per cent. However, a Fidelity spokesperson points out that ‘as more and more advisers are now already agreeing a fee with their client rather than simply taking commission from the AMC, this figure is more notional than correct for each individual client’.

Meanwhile Cofunds – which, unlike FundsNetwork, caters specifically to intermediaries running client portfolios – has set up a more transparent charging structure that will launch next year. The new unbundled charging structure is made up of a £40 annual charge and a sliding scale of annual management charges from 0.15 to 0.29 per cent. Investors with assets between £0 and 100,000 will be charged 0.29 per cent. 

However Cofunds will not publish the fund manager payments it receives from its bundled proposition, which will continue to run until the rules are changed by the FSA.

Senior adviser Adrian Lowcock at broker Bestinvest comments: ‘Fidelity should be congratulated on taking the lead in this. In our experience, clients don’t mind paying fees – what matters to them is transparency and a full understanding of who gets what.’

Bestinvest is also ‘looking at full disclosure’, though Lowcock admits it’s likely to take months rather than weeks. ‘In our business we receive commission payments both as an adviser and as a platform administrator; the amount received is not currently published because fund management companies require us to sign non-disclosure agreements when we agree terms. We therefore have to discuss this with each individual fund management group,’ he explains. ‘Initially it may be that some will act faster than others in allowing the information to be made public, but that at least is a start.’

There are similar good intentions at Money Observer’s sister website Interactive Investor, where the fund supermarket is run through the Cofunds platform. 'Going forward, we want investors to be completely clear on who gets what, so they can look at the annual management charge on their fund and see that Interactive Investor gets X basis points, Cofunds gets Y and the fund management group gets Z,' comments director John Blowers.

He adds: 'We are currently working with our partners to deliver this clarity to our client base and will implement it shortly.’

One major player apparently less keen to follow Fidelity’s lead is Hargreaves Lansdown, which runs the Vantage platform and does not publish how much of the AMC it keeps. ‘If people ask what commission we earn, we’ll always tell them, but at present there are no plans to change our current stance – we’re waiting to see what the FSA’s next response is before we take any action,’ says head of advice Danny Cox.