Ask yourself this, what specific problems is DP10/2 looking to address? I ask because the proposals put forward in DP10/2 appear to undermine the FSA’s stated and laudable desired outcomes of the retail distribution review policy statement.
It has been acknowledged that platform technology has a vital role to play in helping advisers meet the FSA’s ambitions for UK financial advice, serving as a catalyst for the successful transition of advice businesses to the post-RDR landscape. Yet DP 10/2 in its current form could severely compromise the platform market’s ability to meet its obligations to advisers. Our role is to enable advisers to do their job more easily for all their clients, not just a selection of them.
With the consultation paper now not due out until September we have the chance to debate this point fully and frankly. And that debate, to my mind, needs to cover the fact that this push and pull regulatory stance is acting as a brake on momentum behind operational changes that were already in progress within adviser firms and platforms.
The regulatory intervention over the operating models of a platform rather than the nature of the business being transacted makes me believe that the regulator is confused about the role and influence of platforms in the regulated advice process.
What further worries me is that the imposing unbundling for all platforms is likely to reduce consumer engagement thanks to the increased costs and potentially reduced access to products. Consumers would lose out on choice of charging structure. Why is it so often forgotten that for many investors, bundled pricing is at least as good as going direct to fund managers and cheaper than an unbundled offering with separate wrap charges? At the very time the adviser market is shrinking, some investors may be priced out of gaining platform access and the benefits of investment choice and improved understanding of their finances. The higher costs will be ultimately paid by the investor in terms of investment returns and the result could significantly undermine the objectives of RDR.
Add to the mix the fact that the complexities and costs arising as a result of managing different adviser segments (non-advice and advice), products (life and non-life), funds (insured and non-insured funds) and assets (pre-RDR and post-RDR) are significant and the need for industry-wide debate is clear. In particular, when it is evident that the FSA’s preference for an outright ban of rebates could have unintended consequences and is in my view most definitely not the best way to achieve the outcomes it wants to deliver.
Don’t get me wrong, I know that further action is required to achieve RDR’s original goals of, for example, improved disclosure. However, I believe this can be done within the current regulations introduced through Mifid without additional regulation for platforms or some of the elements in the discussion paper.
All of which is why we now ask the platform industry and the advice market to engage fully in a frank discussion of all these issues before the publication of the consultation paper in September.
Cofunds chief executive Brett Williams