View more on these topics

FSA stalls on ruling over cash rebates

The FSA has delayed its decision on whether to ban cash rebates from platforms to clients and declared its intention to ban all payments between providers and platforms.

In its platform policy statement, published this week, the FSA says it is “desirable” to ban cash rebates from product providers to investors, as well as product provider payments to platforms, but it wants to conduct further research into the implications of the rules.

In November, the FSA reversed its original decision to ban payments between providers and platforms but has now changed its mind again.

The paper says: “The FSA has decided that it would be desirable, in principle, to ban both cash rebates from product providers to investors and product provider payments to platforms.

“Given the potential impact of these changes on the business models of platform service prov-iders, the FSA has concluded that further research is needed to ensure that the implications for consumers are fully understood before proposing new rules.”

Speaking to Money Marketing, FSA head of investment policy Peter Smith says no deadlines have been set for the research. He says: “We would rather take our time and get things right.”

Advised platforms and exec- ution-only brokers will be req-uired to present products in an unbiased manner and disclose any commission or fees from fund managers while the FSA decides on the final rules on payments.

The FSA has not set a time-scale for the re-registration of assets on platforms but says it will consider further rules if fund firms or other parties cause unnecessary delays to the re-reg process or if firms are quick to re-register assets but mistakes are made.

On adviser-charging, the FSA says platforms must be satisfied the client has agreed to the charge and the way it is carried out. If a client no longer requires an ongoing service, it is the adviser’s responsibility to stop the charge.

The FSA says independent advice firms can use a single platform or multiple platforms as long as they carry out due diligence on their chosen platform/s, recommend products off-platform where suitable and are aware of other products across the market.

Aifa director general Stephen Gay says: “The change in FSA’s approach to independence could have an impact on proposition decisions being made by firms over the coming 18 months. This lack of clarity only adds weight to calls for delays to the RDR in areas where the industry is not ready.”

Platform policy statement – main points

– Implementation of a ban on cash rebates between platforms and clients will be delayed until the regulator has carried out further research.
– A ban on payments between product providers and platforms has been resurrected and the FSA will consider banning payments to non-advised platforms. This will be implemented at the same time as the cash rebate ban.
– The FSA’s definition of “platform” has been altered so the focus is not on administration services, which could incur VAT charges.
– Platforms need to be satisfied the client has agreed to the payment of an adviser charge and the way in which it is carried out.
– If a client no longer wants an ongoing service, advisers are responsible for stopping the adviser charge.
– Platforms must re-register assets held on behalf of customers to another platform when requested and within a reasonable time.
– Platforms are required to pass on fund information to the end-investor, to enable greater transparency in the market.
– Advised platforms and execution-only brokers will be required to present products in an unbiased manner and disclose any commission or fees from fund managers while the FSA decides on the final rules around payments.
– Advisers are required to take reasonable steps to ensure they use platform services that present their retail investment products without bias.
– Independent advice firms can use a single platform or multiple platforms as long as they carry out due diligence on their chosen platform/s, recommend products off-platform where suitable and are aware of other products across the market.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Advisers need to make it very clear the suitability of a client’s investment relies absolutely on the ongoing advice. I trust responsibility for the “product” ceases as soon as the client switches off the pre-agreed fee.

Leave a comment