It is highly disappointing that this FSA paper has not delivered the expected clear cut decision on all issues relating to platforms as the delays in implementation beyond December 2012 announced by the FSA leaves the platform element of the RDR out of sync with the bulk of regulation.
The FSA said it believes it is “likely to be very rare, if possible at all” that an IFA firm could use one platform for all clients and meet its independence rule. It makes complete sense that advisers should use platforms as best fits the individual client’s needs. An IFA group may use a wrap for HNW and other clients who need greater access and depth of reporting on their investments, while using a ‘fund supermarket’ style platform for clients who mostly buy into packaged products or are more transactional in their investing.
It is now clear that the FSA is set on banning both fund manager rebates and cash rebates paid to consumers, although it will delay a decision while it analyses the impact on consumers and on firms’ business models.
At the same time it appears to sanction the paying of adviser charges through client cash accounts. The question, of course, is where is the cash to make those payments going to come from?
My concern with the FSA consultation paper was always that it would be necessary for consumers to sell small amounts of their investments in order to free up cash to meet adviser charges. To my mind that is a nonsense and the FSA clearly thinks so too, hence, its decision to examine the matter further. It will be interesting to see what conclusions the Regulator reaches.
This paper should not detract from other concerns for the industry such as those arising from the recent IFA satisfaction survey from Defaqto which revealed that the standard of service being provided by platforms in key areas has been sliding over the last year. To my mind there is more danger to the platforms market from this decline in service fundamentals than from any changes to the rules and regulations.
Harry Kerr is the managing director of Avalon Investment Services