LGIM said it plans to unbundle the commissions paid to brokers for trading and research, and instead give each of its active equity funds a defined research budget.
Honor Solomon, head of retail distribution for EMEA at LGIM, said: “This will be incorporated into the fixed fund management fee we introduced last year to give our investors a better indication of the total cost of investing in a fund.”
The change is set to come into effect from 1 April 2016.
Broken ranks
“L&G has broken ranks, ahead of Mifid II which will require asset managers to be explicit about all costs, by charging clients directly for the research costs rather than indirectly via inflated dealing commissions,” SCM’s Gina Miller said.
“We have been saying for years that it is a total scandal that UK retail investors were secretly paying twice for fund managers to do the same job researching the best stocks; firstly through the annual management fee and then secretly through inflated commissions to brokers who would then offer ‘free’ research back to managers to help them select the stocks.
“From their numbers, investors can now see the real extent by which the UK industry were artificially keeping their own costs down by charging clients higher dealing commissions to receive research.
“We applaud LGIM for not waiting until the EU forces this change on the UK industry around 2018, but acting now,” Miller said.
