UK – Edinburgh based fund management group, Scottish Widows Investment Partnership (SWIP) has stopped soft commissioning, the ‘hidden’ brokerage charge, for its pension fund clients.
The move means SWIP will no longer charge their pension fund clients soft commission on the trading of their funds’ assets and is in line with the Myners review recommendation that pension fund trustees should review their transaction procedures and costs in respect of asset management companies.
SWIP claims to be one of the first global asset management companies to implement the change to its charging structure, though Chris Walker, the head of its institutional division admits scrapping the charge wasn’t high on SWIP’s agenda. “Whilst we didn’t agree with the principle, we realised that the Myners review recommendation was likely to lead to changes in commission charges for pension funds and as such we decided to take a lead,” he comments.
Under the softing system, asset managers benefit from services received free of charge from the stockbrokers carrying out trades on behalf of their clients, but which are not passed on to the clients.
Walker doesn’t have any figures on hand about how much the changes mean in money terms, but he does believe this is a start of a trend. “I can’t comment on how much this will cost us, and whilst I’m unaware if other fund management companies are ready to scrap soft commissions at this point, talk in the industry would lead me to believe that others will follow suit at some time.”
SWIP has some £78bn (€127.4bn) in global assets under management.