The FCA published its final rules on platform charges last week and, after all the delay and speculation about the final outcomes, it still managed to include one or two small surprises.
The decision to ban cash rebates was widely expected and, although unit rebates are still permitted, the decision by HMRC to treat them as income means the race to clean share classes and beyond to super, uber or industrial clean has begun in earnest.
The introduction of a sunset clause to move all existing business to clean share-classes by April 2016 will mean some businesses have more work to do than others, with the big three in particular having to pick up a big share of the extra £62m the FCA now says the change will cost.
If the industry sees a proliferation of new share classes this could raise a couple of problems for the issue of re-registration and makes it even more important that a workable automatic process is put in place sooner rather than later.
The one announcement from the FCA that did raise a few eyebrows, however, was the subject of payments to platforms.
In addition to the expected allowance for platforms to bill fund managers for the costs of things such as fund re-pricing, the FCA announced that it would allow payments for advertising to be made by fund management groups.
The FCA says this is going to be carefully monitored and that the payments are not to be used to create bias within the distribution of investment funds but this approach looks like an accident waiting to happen, regardless of how closely it is monitored.
Has the FCA never considered what advertising does or how it actually works?
All advertising is intended to artificially increase awareness of, or create and reinforce people’s perceptions of a brand or a product, regardless of any facts.
Advertising works and advertisers know it works, otherwise companies would not spend millions of pounds every year on product and brand promotions.
Most consumers also know it works, as anyone who has ever bought yoghurt drinks based in pseudo-scientific digestive health benefits or tried a new shampoo because you are worth it can attest to.
It will be interesting to see how different platforms and fund managers approach the issue of advertising but the FCA’s decision to allow, as long as it does not create any bias, simply means a further restriction or ban further down the line when it discovers that if you allow advertising, surprise, surprise, it does in fact create bias.