Unbundled pricing is the only logical way forward for platforms
There has been much debate in the last few weeks on the FSA’s consultation paper on platforms (CP 10/29).
I welcome many initiatives put forward by the FSA as part of the retail distribution review, such as the move from commission to fees, but these potential rules still fall short of the mark. However, one proposal that is spot on is that of disclosure.
The regulator has made great headway in ensuring clients can see exactly where their hard-earned money is going. Platforms, despite still being able to use their bundled charging model, will have to clearly disclose what they are paid from fund groups.
This can only be a good thing for the industry and I salute wraps, such as Nucleus and Transact, that have been campaigning for it.
Re-registration is another positive step. If a platform does not offer advisers the ability to re-register in-specie, I would strongly suggest taking your business elsewhere. How can locking assets into one platform be treating customers fairly?
The consultation paper is a good starting point but if we want to build the reputation of this profession, the FSA needs to consider who should be at the heart of charging structures.
Through the chain of relationships, from client to provider, it is important to remember providers are merely offering a service and should not be dictating terms to advisers and clients.
In the adoption of a fee-based model, all the fee-charging agreements should be made by the adviser and client. Allowing fund managers to keep on rebating platforms takes this power away from the core relationship, especially in light of the fact that cash rebates, used by wraps, are to be banned.
The FSA U-turn on banning rebates is clear evidence it has given in to the muscle of the UK Platform Group, which has been lobbying the regulator. Some wraps will now take a costly hit in converting their business models away from cash rebates, whereas platforms can continue as before in this regard.
It is not good for the industry to know the regulator can be swayed by the influence of big insurance firms. We need clients to assess if their adviser, fund and platform is offering value for money. Only then can they make an informed decision.
Unbundled pricing is the only logical way forward that sits within the ethos of RDR and ensures the client knows exactly what services they are receiving. With newer platforms being penalised, we should get behind the wraps lobbying against the banning of cash rebates. I, for one, hope they succeed.
Sheriar Bradbury is managing director of Bradbury Hamilton