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FSA rebate rules must be for all platforms, say providers

Ascentric and Standard Life are calling on the FSA to include direct to consumer execution-only platforms in its final rules on rebates to platforms from fund groups.

In its March RDR platform paper, the FSA outlines several options on rebates, including an outright ban, full disclosure and stricter rules or guidance on unacceptable practices.

The regulator says it favours a ban but this is not a final decision. It also says it does not see a need for these rules to apply to execution-only platforms.

But Ascentric managing director Hugo Thorman says any changes to platform remuneration must also apply to non-advised business. He says: “The opportunity for direct to consumer platforms to influence a selection of funds that may reflect a higher level of rebates not disclosed to the consumer is potentially higher than on advised platforms. The clients ought to be able to see what rebates there are.”

Standard Life head of platform sales Steven Sands says: “There should not be a differentiation. If the rules do not apply to execution-only, you could see the potential for IFAs to expand their execution-only arms and for fund groups to offer big rebates to them.”

Bestinvest business manager Hugo Shaw says: “There is a risk of having two ways of handling charges. It is confusing for a client that has part of a portfolio on an execution-only direct basis and perhaps wants to move to advice. In the true spirit of RDR, it should be transparent and apply to all.”

Chelsea Financial Services managing director Darius McDermott says: “I have got no problem in how we better disclose charges but if we go down the route of an altogether ban, there is significant evidence that the cost to the end client will go up. Why should that happen in the non-advised world when RDR has come about because of failings in the advisory community?”

Hargreaves Lansdown declined to comment.

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  1. One more attempt by the FSA to drive people away from independent advice to what look like cheaper products. As for Mr McDermott’s comments I think you will find that RDR, on the FSA’s own admission, is not based on fact but public perception – unfortunately we as independent advisers are blamed for all the ills of the financial community. If you support RDR surely you would want rid of this practice which is no different from enhanced allocation rates (smoke and mirrors).

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