The FCA’s decision to ban platform rebates will benefit the end investor and allow investment trusts to better compete with other vehicles, Association of Investment Companies director general Ian Sayers argues.
Last month, the FCA ruled that platform cash rebates to consumers on new business will be banned from April 2014, with legacy fund manager payments to platforms to come to an end in 2016.
Labelling the move as “great news”, Sayers says the AIC has called for some time for the cost of advice and distribution through platforms to be unbundled from the cost of the underlying investment.
He says: “The investment company sector is probably the best case study there is on why transparency alone never resolved the problem of commission bias, and why transparency would not have resolved the problems of allowing product providers to pay for platforms.
“With commission also a thing of the past, customers will now see exactly what they are paying for advice, the platform and the fund. Products like investment companies, which are restricted in paying commission and platform charges, will be able to compete much more on their own merits.”
Sayers adds the banning of platform rebates will ultimately put investors “in the driving seat”, as it will encourage them to shop around for the best price and make them more likely to demand higher standards.
He says: “In the end, we have got to where we should be. One of the RDR’s lasting impacts is that customers should now be able to see exactly what they are paying for. Time and again, research has shown that, when costs are bundled, consumers tend to do poorly.”