IMA claims rebate ban will thwart aims of RDR
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The Investment Management Association has warned that the FSA risks failing to meet its RDR objectives of improving consumer trust and outcomes by pursuing the proposed ban on cash rebates.
In November, the FSA published its latest consultation on platforms which proposed a ban on cash rebates to clients where it offsets or appears to offset an adviser charge. The FSA says it will allow rebates to be reinvested as units. The IMA opposes the ban and says it has been lobbying the FSA to reconsider.
IMA director of authorised funds and tax Julie Patterson says the rules, which mark a departure from earlier proposals to ban rebates between fund managers and platforms, move the FSA further away from achieving its RDR objectives of improving consumer trust and providing better consumer outcomes.
Patterson says: “Our worry is that the proposed changes are not going to meet the FSA’s objectives. We have agreed with the objectives all along, but the FSA is tinkering so much now that it risks destroying any chance of meeting those objectives.”
She argues that the suggestion that rebates should be paid in units will result in “a smoke and mirrors” effect, which will introduce uncertainty for investors over the different transactions that the units relate to.
Patterson says: “Time is ticking. The appropriate systems cannot be developed without the final rules and we still are yet to have discussions about how the legacy book is defined. We are nowhere near the end yet in terms of clarity.”
The FSA says final rules will be published in the summer and the deadline for the changes is December 31, 2012.
Nucleus chief executive David Ferguson says: “A ban would result in further cost and consumer confusion which goes against what the FSA is trying to achieve.”
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