Let’s take a moment to recap the situation on platform charges and adviser payments. Payments between fund groups and platforms are banned. Rebates between platforms and advisers are also banned, even where discounts were being passed back to clients. ‘Pay to play’ distribution deals between providers and advisers have too been banned.
Continued regulatory scrutiny has meant many payments that are seen to bias advice have been outlawed, in a bid to create charging structures where everyone knows where they stand. Advice charges pay for advice. Fund management charges pay for fund management and, you guessed it, platform charges pay for platforms.
Sounds simple doesn’t it? Sadly, the reality is in some cases platform charges are apparently designed to pay for other things.
Money Marketing reveals this week Chase de Vere receives a “service charge” which is different from its advice charge, and apparently, a normal platform charge. This charge is facilitated through the platform, and a “key requirement” for platform selection (or not, depending on whether the company is speaking to a possible platform partner or a journalist).
The company is keen to stress this is disclosed to the client, although one onlooker has drily commented: “You can disclose you’re going to murder someone, that doesn’t make it ok.”
There are also arrangements which seem to bundle together platform services and discretionary fund management, and discounts offered based on the volume of business.
While it is true to say bespoke platform deals are arranged all the time, it all seems a far cry from the clear, transparent environment the RDR was supposed to herald.
There are a couple of reasons why this might be happening. One clue is Apfa analysis of the adviser market which suggests retained profits for advice firms after tax and dividends stood at a paltry 1.44 per cent of turnover in 2015 (the latest data available).
As The Lang Cat principal Mark Polson points out: “Up at the big end, the reason you see vertical integration is there is little capability for firms to make money on pure platform custody assets, or pure advice charges. The dynamics are just too hard.”
And so people are working out new and improved ways of charging for things.
Another reason firms may be agreeing these deals is because they can. Regulations will have been pored over and arrangements will have been found to be compliant. It is a shame that so many bans later, similar payments have simply emerged in a different guise.
Natalie Holt is editor of Money Marketing