View more on these topics

Matter of principles

The retail distribution review promises to take up a lot of column inches between now and whenever it comes to an end.

With responses not due in until the end of the year, a feedback state-ment expected in the second quarter of 2008 and a possible further consultation paper due after that, it is going to be a long haul.

As part of its review of the distribution landscape, the FSA has rightly turned its attention to the role of platforms.

Over the last year or so, as platforms have become increasingly popular with advisers, it is important to ensure that they are appropriately regulated and offer adequate levels of investor protection.

As a starting point, and given the dynamic nature of the market, the Investment Management Association supports a principles-based approach to the regulation of platforms as this can be easily adapted to market developments without the need for frequent rule changes.

The IMA believes that the focus of regulation of platforms should be on the transparency of the platform arrangements.

This should allow investors and their advisers to make well-informed decisions about the services they are using and the charges which will apply to those services.

The IMA also believes that the type of service provided by the platform and how charges are taken should determine the level of regulation required so it is important that regulation seeks to look beyond the label and instead focuses on the characteristics of services provided. If a platform is purely administrative, allowing users to access, manage and value all investments in one place via open architecture, then there is less regulation required than other types of platforms or wrap account services as the latter may have different features such as a limited fund choice or wrappers which carry costs.

Such features may also lead to more opaque charging structures or decisions which are not in the best interests of the investor.

The aim should be for investors to be fully aware of all charges across all products or product combinations at the same time as being mindful of investors’ ability to understand information if there is too much of it or if it if overly complicated. To this end, disclosure of the total expense ratio, any initial charges and the fund’s performance would be the best way of allowing investors and advisers to compare investment funds with other types of investment as well as comparing the cost of buying funds direct with buying them through a platform or wrapped in another product.

Using a platform should not make it harder for investors to understand the charges being applied for different services and it may even be that there is a need for greater disclosure by platform providers at the point of sale.

It is disappointing that with this consul-tation, the FSA did not take the oppor-tunity to review the packaged product rules, which have become outdated and redundant, particularly in light of EU developments, notably the markets in financial instruments directive.

Removal of these rules and concentration on principles-based regulation would help to focus on the service element of platforms.

Mona Patel is head of communications at the Investment Management Association


Product matters

Zurich has introduced a concept aimed at overall protection. It is offering two precisely descriptive variations – the level protection plan and the decreasing mortgage plan. They offer a menu of life insurance, critical-illness cover and income protection with optional permanent and total disability cover and waiver of premium.Viewed as merely a life and/or critical-illness […]

We need to hear the ombudsman’s views on the RDR

Surely the views of Financial Ombudsman Service are a key component of the RDR so where are they? We know what the FSA thinks or at least did at the RDR’s launch. And new boss Hector Sants may let us know what way the wind is blowing next week. But what of the man who […]

Nicholls rallying small advisers to answer RDR call

Outgoing Personal Finance Society president Carole Nicholls has issued a rallying cry for members to respond individually to the RDR and not rely on vested interests or the PFS to voice their concerns.Speaking at the PFS conference in Birmingham this week, in her last speech as president, Nicholls warned that small advisers could be particularly […]

Can UK companies satisfy global appetites?

By Mark Martin, Manager of Neptune UK Mid Cap Fund

Rapid economic and income growth is leading to a dramatic shift in diet towards protein products right around the globe. UK companies such as Genus, the world’s largest livestock breeder, are benefiting from this increasing demand. Mark Martin, manager of the Neptune UK Mid Cap Fund, discusses this investment theme.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm