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MM Leader: Platform rules fail litmus test

Platform providers are understandably up in arms about new requirements to inform investors on investment changes.

From January next year, platforms will be required to provide both advised and non-advised investors with information and notifications from fund managers and depositaries about any changes to their investments.

The information can be sent electronically if the platform has the relevant email address but where this is not possible it must be sent by post. Clients cannot opt out of receiving this information.

The new rules fail to take account of the fact that advised clients should already be getting any information they require about their investments from their IFA. This duplication of effort is likely to hit investors with increased costs without any discernible benefit.

The thinking behind these rules also fails to properly appreciate the role of platforms in the financial planning process. Platforms are a software and administration tool to help the adviser offer the best service to their clients.

The IFA has the client relationship and is the regulated entity taking responsibility for the advice being given. These plans muddy the waters of advice responsibility in the eyes of the investor and may bombard them with information they do not want or understand.

This not the first time the FSA has signalled platform policy that is likely to hit consumers.

The current proposal to ban cash rebates to investors, which will be rubberstamped or rejected in the upcoming final rules, removes a system of payment which is working in the client’s interest with little potential for behaviour-changing bias.

The FSA’s continued suspicion over IFAs wanting to use a single platform again fails to appreciate that platforms are a financial planning tool, not a product.

The litmus test for any new set of industry rules should be whether or not they benefit the end-consumer. Like many elements of the FSA’s current retail reforms, certain platform rules appear to fail this test.

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