Fidelity International has called on the regulator to rethink its proposal to ban cash rebates to investors to avoid further complicating the platform market.
Head of UK fund partners Ed Dymott believes that the FSA’s plan to ban cash rebates but allow rebates to be reinvested as units will create deals only worth a few pounds, push up the number of transactions and create more tax liabilities.
He is also concerned about the lack of clarity over what happens to clients who sell their holdings before receiving their reinvestment units. But Dymott says the market is heading towards more net-commission-style products, with adviser fees added on top. This would reduce the attractiveness of rebates and thus any potential for bias.
He says: “I do not see a big problem with allowing cash rebates from providers to inv-estors and, as such, I would recommend that the FSA’s proposals in this area should be reviewed again. Allowing cash rebates but having better FSA monitoring and supervision seems sensible. We need a regulatory environment that drives simplicity.”