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Calls for platforms to be subject to tighter regulation

Platforms should be subject to the same regulatory constraints as product providers, says Aegon.

In its response to the FSA’s RDR consultation paper, Aegon says where platforms provide similar functions to product providers they should be “subject to equivalent regulation”.

The response says: “This should apply to TCF responsibilities as well, so platform providers need to review their target markets, assess whether solutions are designed to meet identified needs and engage with distributors on mutual responsibilities.”

Aegon is also calling for higher adequacy requirements in the platform arena. It says platforms are not subject to the same capital adequacy requirements as insurance companies but are essentially competing with the packaged products offered by the latter.

The firm says: “This creates a potential danger for consumers as recently witnessed by the failure of a small Sipp provider where the investors could potentially face a significant tax bill left by the Sipp provider.”

Aegon also believes advisers should use more than one platform. It says: “We struggle to see how adviser firms using a platform or wrap that uses a single provider product/tax wrapper can satisfy the new standard for independence. Some wraps or platforms do not offer completely open architecture and instead use a single provider’s product or tax wrappers. If products were completely commoditised, then this would not raise issues. But they are not, and we do not anticipate them becoming so for the foreseeable future. For this reason, Aegon does not believe a single wrap which does not offer completely open architecture is consistent with independence.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Aegon really ought to read what the FSA have said on single wrap use and independence before they reveal how out of touch they are by publishing comments like these. Who cares about Aegon’s opinion in an area where they have no expertise?

  2. I actually thought they were making a fair point with regard TCF responsibilitites and capital adequacy, it’s s bit like the argument for a fair balance between capital adequacy and PI mandatory requirements for small IFA firms compared to banks “advice/sales arms” and the fact the advice arm has no seperate capital adequacy nor PI (and as we found out last year, they had no capital it was all smoke and mirrors!)
    AEGONs point is not saying that platforms with open architecture should fail an Independance test, nor that an IFA could not justify using a closed architecture platform for ALL their clients provided they ALL fell in to the same target market, what they said was “If products were completely commoditised, then this would not raise issues. But they are not, and we do not anticipate them becoming so for the foreseeable future. For this reason, Aegon does not believe a single wrap which does not offer completely open architecture is consistent with independence” As you can see I’ve said that an IFA CAN justify one platform even without open architecture if all their clients fit the same profile target market. My clients DON’T, hence why to be Independant we use several different platforms including Transact, Fundzone, Fundsnetwork an Skandia/Selestia and try to select the one which best suits the client at the time and only move if cost effective for them (and us)….
    Oh and by the way, I did read the FSA discussion paper on platforms and if I rememebr rightly I did respond to them with my opinion….

  3. Phil
    May be I’m being rather uncharitable but you don’t suppose that what Aegon really want is for platforms to be loaded with additional costs in order to slow their encroachment on life office business?

    That said, I am very much in favour of platforms being open architecture and offering advisers and consumers a choice of products. If platforms are providing easy access to funds at significant discounts and are providing a view across all a client’s investments/wrappers, they are adding value; if they are locking them in to a single provider, they risk removing value.

  4. Andy – I agree with you on that. The sooner we see re-registaration away at a fair and fixed cost the better, it is pronouncments on this issue by the FSA that could make a massive difference. Until the pressure to truly treat clients failry on insurers and platforms will not achieve a fair outcome and the inability to re-register away from what may well be a very good platform has to be in the decision making melting pot for every individual client and the adviser needs to be able to justify their independance if they choose a platform that is restictive about re-reg.

  5. Phil
    May be I’m being rather uncharitable but you don’t suppose that what Aegon really want is for platforms to be loaded with additional costs in order to slow their encroachment on life office business?

    That said, I am very much in favour of platforms being open architecture and offering advisers and consumers a choice of products. If platforms are providing easy access to funds at significant discounts and are providing a view across all a client’s investments/wrappers, they are adding value; if they are locking them in to a single provider, they risk removing value.

  6. Phil
    May be I’m being rather uncharitable but you don’t suppose that what Aegon really want is for platforms to be loaded with additional costs in order to slow their encroachment on life office business?

    That said, I am very much in favour of platforms being open architecture and offering advisers and consumers a choice of products. If platforms are providing easy access to funds at significant discounts and are providing a view across all a client’s investments/wrappers, they are adding value; if they are locking them in to a single provider, they risk removing value.

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