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MM Leader: Advisers need clear direction on wraps

The FSA appears to have woken up to the pivotal role that platforms will play in the retail distribution review and the clarity needed over their position.

Speaking at a conference last week, FSA conduct risk director Dan Waters revealed that the upcoming RDR policy statement will include a specific chapter on the role of wraps and platforms.

The introduction of adviser-charging means advisers and providers may have to rely on platforms to facilitate this new method of remuneration, either through cash accounts or helping fund groups distribute through a broader range of share classes.

Regulatory intervention from the FSA, in the form of the RDR, is likely to hand these firms a position of power that must be accompanied with the appropriate responsibilities.

Advisers must have the confidence that their chosen platforms are in it for the long haul and that all charges passed on to the client can be justified.

The removal of future trail comm-ission and the introduction of adviser-charging will mean that some platforms will have to restructure their business models. Platforms will have to be more explicit in explaining the reasons for payments received from providers.

We have already seen high-profile names looking to reposition them-selves in the run-up to 2012, both in what they offer the adviser and how they are remunerated by providers.

For example, platforms have launched or are looking at launching risk-based portfolios, a service that is also being offered by traditional pension providers, fund houses and a growing number of IFA firms.

This emphasises how the traditional roles of product provider, platform and distributor are being redrawn.

Many advisers can already point to the positive effect that the take-up of wrap has had on their own business and the experience of their clients and there is no doubt that the use of platforms by advisers is set to soar.

There are, however, a number of important concerns holding many advisers back from fully embracing wrap, such as ensuring that any extra charges to the client can be justified and confidence in the long-term focus of the platform.

This is not helped by the growing number of scare stories being stirred up by some platforms looking to undermine rivals.

The FSA’s policy statement must give us a clear direction on their thinking over platforms to help advisers make an informed decision about their future wrap strategy.

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