Investors make only tiny savings from headline-grabbing ‘super clean' share classes, according to new research by the lang cat.
Modelling the impact of discounted share classes, the platform consultancy found the holder of a £20,000 ISA with a 15% holding in discounted funds saved just £4. Even if the portfolio was completely invested in discounted funds, the saving was only £16.
When a typical 0.75% adviser charge was added to the client’s cost, the researchers found the effect of the discounted funds was even smaller.
Lang cat principal Mark Polson said: “Unless a customer holds all of their money in discounted deals – and an adviser would have to demonstrate they have not been unduly influenced – any saving is negligible, often amounting to little more than a few pence per thousand pounds invested.
This research demonstrates that it always pays to look beyond the hype
"This research demonstrates that it always pays to look beyond the hype.”
While discounted funds may save customers a small amount, the proliferation of share classes adds to the re-registration “headache”, the report noted.
There may also be potential for bias, it added: “Advisers do need to be mindful that platform selection and delivery of individual advice is not unduly influenced by the attraction of these deals.”
The research, commissioned by Nucleus, assumed an average discount of 0.08% and an ongoing fund charge of 0.75% when modelling the impact on an ISA.
