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Platforms roundup 2011: Platform plans hit by FSA indecision

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This was supposed to be a year of clarity for plat-forms, with the FSA’s eagerly awaited policy statement expected to clear up the cash rebate issue and give platform providers specific instructions to carry out before January 1, 2013.

Instead, many feel the regulator has created more uncertainty over the future of platforms by issuing a policy statement in August that contained very little policy.

In the previous consultation paper, which was published in November 2010, the FSA decided against its proposal to ban payments between providers and platforms. In August, however, it changed its mind again.

The regulator’s policy statement delayed a final decision on whether to ban cash rebates being paid by platforms to clients but declared it was considering banning all payments between providers and platforms.

A cash rebate ban is seen by most wrap providers as the enemy of a transparent model. Most platforms wrote a joint submission to the FSA outlining their opposition to the ban.

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Ascentric managing director Hugo Thorman (pictured) played a key role in the submission and was encouraged that the FSA delayed issuing final rules.

He says: “Anything which postpones a ban on cash rebates and forces the regu-lator to rethink its strategy has to be a good thing. The more information given to the FSA about the implications of a ban the better because I believe once it understands the problems a ban creates, it will change its mind.”

The FSA called for the delay so it can carry out further research into the implications of a ban on provider payments and cash rebates, which includes quizzing consumers to gauge their knowledge of platforms’ functions.

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CWC Research senior partner Clive Waller (pictured) says the regulator has failed in its attempts to understand the industry and should have provided clarity by now.

He says: “It has been a year where we expected to be given rules and clarity should have been provided. Instead, we have ended up in exactly the same position we were at the beginning. For the regulator to take three goes to get this right is absolutely astounding really.

“Everyone is looking to adviser-charging and the new world and at the same time looking for a platform that can help them make that trans-ition but they do not know what type of platform to use because there are no set rules.”

As an additional point in the policy statement, the regulator said it was considering extend-ing the reach of a rebate ban to execution-only platforms.

Many platform providers and advisers were unhappy the FSA excluded execution-only platforms from its original ban on provider to platform payments.

Nucleus chief executive David Ferguson says if financial services is to improve its reputation in the eyes of consumers, then transparency across all platforms is key.

He says: “I do not see why execution-only platforms should fall outside the scope of the regulator. If we are to improve the service we provide as well as the reputation of the industry, then a move to a transparent model is a must.”

The question of extending the rebate ban further to life wrappers has also been suggested as a move in the right direction, with Cofunds chief executive Martin Davis saying the FSA will inevitably extend the ban due to fear of a distorted market.

The regulator has said it will consider possible distortions that any new rules may have on the market.

This year, the corporate wrap market started to gain momentum with the likes of Zurich, Aegon and Friends Life all throwing their hats into the employee benefits ring.

The Platforum managing director Holly Mackay says: “It may well be the case that in five years, corporate wraps dwarf the amount of total assets held on adviser platforms, particularly as advisers look to employee benefits as a logical altern- ative to advice.”

This year has seen Cofunds, Skandia and Fidelity FundsNetwork engaged in a private battle to be seen as the most transparent of the traditional supermarkets.

In September, Funds-Network took the first step by publishing full details of the fees it receives from fund management groups, before committing to producing an unbundled pricing structure in the first quarter of 2012.

Cofunds then followed with details of its unbundled pricing structure, due to launch in July next year, but did not reveal fees it currently receives from fund managers.

Skandia has yet to produce details of an unbundled pricing model but says it will have such a structure in place before the end of 2012.

Jacksons Financial Services managing director Pete Matthew says clarity and transparency should already be the default standard.

He says: “It frustrates me that the FSA cannot impose transparency as a default option straight away. A position where no funds have rebates is Nirvana but at the very least people should know exactly what they are paying for and who is taking what share.”

But Thomas and Thomas Financial Services managing director Darren Lloyd Thomas says while transparency is what the FSA is looking for, it will push prices up.

He says: “The unbundled model will mean that large platforms will not be able to use their size to negotiate better deals for the client. At the moment, with the likes of Skandia, they have a bundled structure but through that get better deals from the fund managers.”

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Readers' comments (1)

  • Darren
    You say Skandia is a better deal for the client than say Nucleus. Can you let us know what you base that on please?

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