Transact says the debate about whether cash rebates to clients are equivalent to adviser commission is a “dangerous semantic distraction” from the problems that would be caused by a cash rebate ban.
Transact managing director Ian Taylor (pictured) says the potential cost to investors of a cash rebate ban is “immense” because clients who hold assets through a wrap service will be disadvantaged to the value of the rebate they would have received.
Taylor says: “The issue that a rebate to a client is equivalent to a commission payment to an adviser is the wrong debate and a dangerous semantic distraction from the real issue.
“Banning cash rebates would cause extensive client detriment and lead to very many investors paying more than they need to. The potential cost to investors of a rebate ban is immense.”
The FSA’s platform policy statement, published in August, delayed the final decision on whether to ban cash rebates being paid by platforms to clients but said it is “desirable” to do so, along with banning payments between product providers and platforms.
Once decided, the new rules will not come into force until after the RDR deadline of January 1, 2013.
Ascentric managing director Hugo Thorman says: “I agree that there will be client detriment if there is a ban on rebates to clients.”