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Life company products likely to escape platform rebate ban

Ed-Dymott.jpg

Industry experts predict life company products will not come under the scope of the FSA’s platform rebate ban.

In its platform policy statement last August, the regulator said it was “desirable” to ban payments between product providers and platforms for advised and non-advised business but delayed final rules to carry out further research.

Platforms have lobbied for life company wrappers to face a similar rebate ban. Last September, Cofunds chief executive Martin Davis predicted the FSA would “inevitably” extend any rebate ban to life wrappers to avoid an unlevel playing field.

But Fidelity FundsNetwork head of commercial Ed Dymott says life company products are now unlikely to be brought under the ban, ahead of an FSA consultation paper later this year. He says: “We do not believe life insurers will come under the new rules but it is our understanding that execution-only platforms will remain under the scope.”

Davis says: “We are still hopeful the FSA will look at all the aspects of a rebate ban and we will continue to talk with them because we believe all rebates should be treated the same.”

Avalon director Harry Kerr says: “It is bizarre you could treat platform rebates and those from a life insurance product differently and serves to create more confusion.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Dominic Thomas 7th June 2012 at 3:20 pm

    What a fiasco. It is nearly 43 years since the moon landing, is this really the best that the industry and regulator can do?

  2. Duncan Carter 7th June 2012 at 3:50 pm

    This is potentially going to lead to a bias, the continuation of such as I understood matters was one of the RDR’s key objectives.

    Apart from intensive large life office lobbying, I’d be really interested to know what the logic of allowing this double standard this would be?

  3. Dominic, this is not the best they can do, you aint seen nothing yet, just wait until post 2012 when the manure really hits the fan and hundreds of thousands of ordinary consumers are not able to access IFA services due to the costs of fees.

    Then you will really see what they can do.

    The architects of this imminent disaster which will harm financial markets as much as IFA firms, have already flown the nest and left us with a quagmire of bad regulation, inadequate banking supervision and inept administration, along with an unfair FSCS levy system and an FOS that is basically unfit for purpose.

    If I wasn’t such a peaceful fellow I would wish a plague on their houses for screwing up our industry.

  4. there is a fundamental difference between a platform and a life co. Platform provides external funds, life cos provide their own funds where some are broadly outsourced to external managers. fundamentally different

  5. They are not fundamentally different and I can only assume that anyone who argues they are has self-serving interests! I just hope common sense will prevail here, but not getting my hopes up!

  6. They are not fundamentally different and I can only assume that anyone who argues they are has self-serving interests! I just hope common sense will prevail here, but not getting my hopes up!

  7. Most life company funds are in house ones so there is a lot of mischief making here by CoFunds and Fidelity. They know the life companies can’t be brought into the ban or at least it would take some time to resolve buying them vital time to sort out the administrative mess of their own making.

    The life funds are fundmantally different because at the asset level they behave like an institutional fund with rebates paid accordingly. There may not actually even be a ‘rebate’, just a reduced management charge. The life fund is owned by the life company. The fund may be divided into units which may determines the value of an individual policy. Any rebate forms part of the fund valuation and so gets passed back to the investors in the fund via the unit price.

    Any collective investment including those on platforms are owned by the policyholder. The policyholder is responsible for the tax arising.

    The problem with platform rebates is that the rebate can be used to subsidise and hide the cost of the platform from the consumer regardless of what funds are chosen.

    This is not and cannot be the case with a life fund where the customer may choose nil rebate in house funds or external mirror funds with a potential rebate..Any rebate would be variable according to fund which precludes it being used to subsidise the wrapper cost.

    If what Fideltity et al say about un-level playing fields is true then I look forward to an immediate update of their wrapper selection tools.

    Life products took a tremendous kicking in the 2008.budget which changed CGT very much in the favour of collectives, it was the fund groups that lobbied to prevent the life companies getting any concessions, so we know where the lobbying power lies.

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