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Bestinvest slams “embarrassed” execution-only rivals

Bestinvest chief executive Peter Hall has slammed “embarrassed ” execution-only platform rivals for refusing to disclose payments they receive from providers and criticising the FSA’s latest execution-only proposals.

Hall says his firm welcomes the FSA’s focus on improved disclosure requirements outlined in this week’s platform policy statement. The paper revealed the FSA will consider the treatment of both advised and non-advised platforms as part of its payment ban proposals and confirmed that execution-only platforms will have to fully disclose commission or fees from fund managers.

Hall says it is hard to understand why competitors are opposed to publishing such payments.

He says: “Are these competitors embarrassed to let their clients know how much they actually earn for providing supposedly ‘low-cost’ execution only  services compared with the limited cash rebates they offer? Why shouldn’t a client understand whether a particular fund or manager might be promoted because they are prepared to pay more for distribution.”

Yesterday, Hargreaves Lansdown chief executive Ian Gorham told Money Marketing he is against the FSA’s proposal to force disclosure of “commercially sensitive” information on fees paid to the platform from third parties. He says: “It seems odd that we would be required to disclose this information and we are concerned about the consequences for clients if fund managers have to disclose the deals they are giving to everybody. You could end up with a market that offers the same deal everywhere rather than one where firms compete to give the best price.”

Hargreaves Lansdown tried to allay concerns about the impact of Monday’s FSA platform policy statement, suggesting the changes required will have no material impact on the firm. The firm’s share price fell over 12 per cent on Tuesday.

Hall says investors need to know if they are getting good value for  money and that current agreements with fund managers do not allow that disclosure.

He says: “We welcome a new world under RDR where disclosure is required. The same high standards of disclosure should apply both to advised purchases and those on an execution-only basis. There should be no difference.”

Hall says new business models will emerge from the final rules on the mechanics of payments, while investors will also benefit.

Hall says: “Existing providers will need to respond rather than sticking their heads in the sand. We are indifferent which way payment is made because we are confident that we are offering great value for money – the important thing is that investors are able to test that through transparent charging.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Full disclosure! Good heavens!
    The augument that clients will all end up paying the same is probably true. Only the service the client gets will the be variable.
    Advisers will have to live close to their clients. Good: Know their client Good:-
    offer a fantantic service Good:- Will clients pay for it? Doubt it Not so good:-

    Personally a good local face to face service will ultimately shine through but i’ll be doing a paper round to supplement my advisary service.

  2. Surely difficult to argue that customers will end up with the same deal everywhere without putting yourself in a position whereby you’re effectively colluding to set the effect of charges and rebates.

    Each platform should be compelled to demonstrate the independence of their pricing processes. As the motor (and other) insurance industry has to following an OFT review.

  3. The problem is that it is a fine line between advisory and execution. How many of these so called exectution firms are actually using recommended lists of funds, yes leaving the client to make the decision and carry the can, but nevertheless recommending specific funds.

    As someone has already stated face to face advice will still be the key. We already have the internet if people want to shop around, but how many find it too much information and therefore confusing.

    Anyway the Money Advice Service is going to do away with the need for advisors so why worry!!!!!

  4. Mr Gorham

    Guess what?

    A level playing field is actually what we want to achieve.

    If you can’t look a client in the eye and tell him how much yu are earning from him then you’re in the wrong business.

    “Commercially sensitive” information? Are you having a laugh? it’s client sensitive information – the sort of stuff that we already reveal to clients and the sort of stuff that everyone should be required to reveal.

    When I remember the number of times HL have claimed the hgh moral ground It makes me feel just a bit nauseous to see this sort of desperate nonsense.

    We are now seeing the true colours nailed to the mast and HL being deservedly slaughtered for it.

    “It won’t affect your firm”?

    That’s almost bordering on a laugh rating of hysterical.

    Ian Coley
    Partner
    Medical Investment Services

  5. I agree that the same disclosure rules should apply whether it is advised or non-advised business.

    But I don’t believe that full disclosure will bring about any material benefits to clients. But the FSA will be able to pat itself on the head for being so moral and righteous.

    The fact is that every industry and commercial enterprise has to make a profit – or die. Customers, when buying cars, shoes, sheds, perfume, jewelry, food, electricity, TVs…………… understand this and accept that they pay more than the actual cost of an item to cover marketing, distribution, administration, staffing, offices and factory leasing………….but they don’t expect to be given a breakdown of all these costs. It’s only in financial services where we are expected to give the whole nine yards on charges leaving the customer to guesstimate whether such charges are reasonable. And will the customer be able to make that assessment if he has never run a business or if he has never had to deal with the time and cost burden of dealing with the FSA and the various other quangos, all of which are being indirectly paid for by consumers.

  6. Tyburn Asset Management 3rd August 2011 at 2:38 pm

    I have to agree with the FSA on this. We cant have transparency in some areas and not in others.

  7. Sam Worthington 3rd August 2011 at 10:27 pm

    I think the FSA is a lot smarter than many people would give them credit for. They know what they are doing here and its resolving a lot of controversial areas.

    Laws and regulations change all the time and affect business. But businesses who base their core on benefits of regulations will always be very vulnerable.

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