A lobbying group focused on greater transparency in the investment industry has thrown cold water on the view that the so-called platform price war between firms such as Fidelity and Hargreaves Lansdown that has led to a fall in charges is actually of benefit to investors.

A lobby group which says it campaigns for greater transparency in the investment industry has poured scorn on the view that a charging "price war" between platform providers such as Fidelity and Hargreaves Lansdown actually benefits investors.

As a result of incoming new rules laid down by the Financial Conduct Authority, many platform providers have announced new charges before the April deadline. This week, Fidelity unveiled its new pricing structure which aims to beat rival platforms such as Hargreaves Lansdown by undercutting their platform fees.

SCM Private, founder of the True and Fair Campaign, has questioned the benefit to investors of the new regime and said companies were not passing on the benefits of their economies of scale and instead "rewarding" customer loyalty with higher charges than their smaller competitors.

"Fidelity, like many of its peers is missing the bigger picture. If they and other brands had the courage to break away from the pack and do the right thing by giving investors and savers, a simple total cost of investing, consumers would be significantly better off. This one number should include all the costs that are deducted from investor’s pockets, fund manager, wrapper and platform fees together," said Gina Miller, founder of the True and Fair Campaign and SCM Private.

Fidelity announced that it will be introducing a 0.35 per cent platform fee for clients with up to £250,000 ($415,000) on its platform, cheaper than the 0.45 per cent unveiled by Hargreaves last week.

Once an investor holds more than £250,000 with Fidelity, the fee drops to 0.2 per cent, contrasting with Hargreaves, where the fee is 0.25 per cent between £250,000 and £1 million. Above £1 million for Fidelity there will be no charge, while for Hargreaves the fee is 0.1 per from £1 million to £2 million and nothing above that.

Danny Cox, head of financial planning at Hargreaves Lansdown, told this publication he expects that most users of its fund platform will pay less under its new unbundled pricing structure.

"The falling cost of fund management and lower platform charges, combined with the growth in DIY services give the investor more choice, and make it a great time to be a DIY investor," said Cox.

"In terms of the future, the cost of fund management is only going to go one way, and that is downward as the scale gets bigger. So the more people that take advantage of these really good fund deals, the lower the costs will go. We think fund management deals will get better and better, and all the benefits of these cost reductions will be passed on to investors," added Cox.

The new charges from Fidelity and Hargreaves are a result of the Retail Distribution Review which banned trail commission as the FCA was worried that it could influence the recommendations advisors give to clients. These changes have led to platform providers restructuring their charges so that they now provide the new clean model, which does not include commissions, fees, or rebates.

“Until the FCA finally addresses this fee farce, where nobody knows the true total cost, trust will never be restored. The increasing number of investors trying to avoid excessive costs by doing it themselves will end up mis-buying rather than being mis-sold savings and investment products. For instance, for investors with less than £250,000, the bigger platforms are not as competitive as their smaller rivals,” said Miller.

Transparency

In April last year, the FCA said that cash rebates would be banned from 6 April 2014 for new clients and until April 2016 for existing customers. After these dates a more transparent pricing model will be implemented, where platform charges will be disclosed to and agreed by investors.

These changes were brought in by the FCA so that clients would be able to make more informed choices and understand what they were paying for. This has led to platforms operating at least two share classes in their funds with the old-style traditional bundled share class model and the new clean share class model.

In a guidance consultation paper on changing customers to post-RDR unit classes published last October, the FCA said that the move to clean share classes must be "fair and in the best interests of the client". The regulator said that that if clients stood to lose out as a result of moving to clean share classes, platforms should not go ahead.

"We would expect in most cases that the clean unit class would be exactly the same as the pre-RDR class, with the only difference being the reduced annual management charge. However, if this is not the case, and if a client is in any way disadvantaged by such a conversion, we would not expect that conversion to take place, so we would expect the effect of the conversion on clients to be considered," the FCA said.