The FSA’s platform paper has arrived, a little later than expected and a lot lighter on specifics. I have some sympathy with the regulator here as I suspect what it set out to do with the retail distribution review has been overtaken so often and by so many different issues that it must be a struggle to stay on top of things.
There is much debate about the use of single platforms and how it is unlikely that, to be independent, a single platform will suffice and that different client segments, even if largely homogenous, will have outliers to accommodate, either on a more suitable platform or even completely off-platform. You cannot hammer a square peg into a round hole without consequences.
Cash rebates to client accounts are a source of vexation for the regulator. That clients can currently use their own cash rebates to pay fees or reduce the charges applying to their portfolio seems outweighed by a dogma over transparency.
Paying closer attention to disclosure would lead to a less engineered solution than differing share classes. I tend to pay more notice to the work the Tax Incentivised Savings Association has done on how cash rebates could harm re-registration of assets with their members than the theoretical “it should not do so” from the regulator.
After the ban on cash rebates, the regulator does not seem to feel that differing share classes will be necessary or, even if they are, that they will confuse retail investors.
I find this hard to square when the FSA says the current system of cash rebates is open to abuse and is misunderstood by clients but that an overload of information on different share classes and fund reporting via platform fund report rules will not confound clients already complaining about too much paper.
I am a fan of the work the FSA is doing on provider payments to platforms but wish it had been this diligent when looking at life company products. For years, there were all manner of opaque charging structures that were ignored but platforms with far higher standards of consistent charging are subject to the kind of interference that would not have been tolerated by the bigger players.
If we are to worship the new deity of transparency, all platforms, wraps and supermarkets should disclose their charges and earnings sources fully.
I am interested in the delay announced here, which I suspect may have something to do with a platform distribution beast that for years has made an excellent turn from the huge levels of rebates retained from the fund groups it promotes.
Looking at capital adequacy, the FSA must be congratulated on its decision to delay the adoption of these measures in the current climate. Many firms are still recovering from the additional FSCS payments made this year and this should help them in the short term.
Lee Robertson is chief executive at Investment Quorum