Platforms face cap-ad and tech from the RDR
Share
Hicks: Impact of failure
Fidelity head of retail sales Peter Hicks says capital adequacy requirements for platforms are set to increase as they move higher up the regulatory agenda.
Speaking at a Fidelity briefing in London last week, Hicks said the FSA has now realised that platforms are fundamental to making adviser-charging work because of the cost, complexity and system developments involved.
But he said: “If platforms are at the heart of one of the FSA’s big principles of the retail distribution review and the industry is relying on them so much, then the capital adequacy requirements could be expected to go up because the impact of a platform failing would be very great.
“So you would expect platforms to be very well capitalised and it is not news to say that not every platform in the industry is well capitalised.”
Nucleus chief executive David Ferguson says: “Capitalisation and risk management seem certain to become bigger issues as aggregate platform scale increases.
“Inevitably, the companies that will be best equipped in such an environment are those that are demonstrably profitable as no one, regardless of how deep their pockets are, is going to support perpetually loss-making operations.”
Novia chief executive Bill Vasilieff says Fidelity’s line is a typical scare story from a big name. He says: “Capital adequacy requirements do increase as assets increase but so does the income of the platform, and at a faster rate, so capital adequacy requirements reduce relative to income. I do not know of anyone who will struggle.
“A much bigger issue is the problem that will be faced by those platforms with obsolete functionality after the RDR. The costs of upgrading their technology, not to mention the logistical challenges, will be far greater than increases in capital adequacy.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
