The FSA has warned that revenue-sharing arrangements where advice firms hold shares in a platform and benefit financially by investing client assets on that platform will not be allowed to continue after the RDR.
Speaking at the Capita Financial Software conference in London last week, FSA conduct and risk division supervisor Rory Percival said the regulator has seen firms form revenue-sharing arrangements recently that would breach the RDR.
Percival said: “The rules we have set out clearly prevent an advisory firm white-labelling a platform and sharing the revenues generated through advised business being placed on the platform. I make this point very clearly as we see firms introducing revenue-sharing arrangements now that apparently will be in breach of the adviser-charging rules in 2013. We ask whether firms are really introducing an arrangement that has a shelf-life of 15 months or if they have misunderstood the adviser-charging rules.”
Percival added that there are no rules against adviser firms holding shares in platforms but stressed that conflict of interest issues must be managed in these cases.
IFA firm Paradigm announced last month that it has signed up as a shareholder in IFA-owned wrap Nucleus and extended its deal to white-label Nucleus to power its platform by five years.
Nucleus chief executive David Ferguson says: “It is not possible to comment on the FSA’s view in the absence of greater detail or rules.”
Ascentric head of marketing Dominic Ventham says: “This is an area that the FSA has been clear about. Adviser firms cannot keep any margins arising from platform business. The only real grey area is how you reconcile having a shareholding in a platform and the degree to which this then influences where you place client money. Disclosure is obviously key here together with the demonstration of platform suitability.”
Bloomsbury Financial Planning partner Jason Butler says: “As long as the adviser is carrying out the requisite research for their clients, then whether or not they take a share of the profits of a platform should be irrelevant, as long as the service and the price the customer receives is good.”
Pilot Financial Planning director Ian Thomas says: “Advisers having a shareholding in a platform could work for the good of consumers because they could have an influence over the way the platform operates.”