Fundsmith founder attacks platforms and fees
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Terry Smith, the founder of Fundsmith, has called for a ban on trail commissions after lambasting platforms.
Speaking at the annual Tacitus lecture held by the Worshipful Company of World Traders, Smith railed against platforms.
Smith said there was not “any evidence that this makes a positive contribution” to returns, nor did investors get a better deal on fees. (article continues below)
He added: “Fund management fees are too high in the UK. One of the reasons is the advent of fund platforms.
“The platforms get their revenue from trail fees paid from a proportion of the funds’ management fees.
“They therefore have a vested interest in management fees remaining high enough to pay their trail fees.
“The need to pay these trail fees means that fund managers have to charge enough to cover their own costs and profit margins plus the trail fees to the platforms.”
Smith said the payment of trail fees introduced “an insuperable conflict of interest” questioning whether platforms would carry funds that do not pay sufficient trail fees.
He added: “To be effective, RDR would need to ban the payment of all trail fees, with the platforms being paid by charging investors for administration and advice.
“Any bending of that principle would leave in place conflicts of interest which will serve investors badly.”
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