Opinion is divided on whether continuing to allow some payments between providers and platforms is a necessary regulatory retreat, or a measure which could be open up to abuse.
Rebates might be on the way out, but that doesn’t mean product providers can’t send some cash platforms’ way.
A number of industry experts have expressed surprise at the Financial Conduct Authority’s (FCA) decision to permit platforms to charge providers for a number of activities.
Outlining its final rules for platforms earlier this year – in which the FCA’s main requirement was for platforms, for the most part, to be remunerated by a platform charge paid directly by clients – the regulator said there should remain a number of scenarios where it is still appropriate for platforms to accept fees from providers, including in corporate actions.
Are provider-to-platform marketing payments acceptable?
Another concession was made in the form of “payments for marketing”, reflecting a fairly ambiguous set of permissions.
Industry opinion is divided over whether the concessions represent a necessary trade-off in order to guarantee a fair and open relationship between platforms and providers, or whether a potential loophole has remained open.
Transact head of marketing Malcolm Murray said the concessions are at odds with the spirit of the paper.
He said: “It is always questionable whether this is a backdoor way of fund managers paying platforms. We would rather the whole thing was absolutely clean and it just was not allowed.
“It may never be abused, but the moment you open a door, however small, people begin to get anxious that perhaps it will be used to make payments that otherwise would not be allowed.”
Standard Life head of platform propositions David Tiller said the rules on marketing payments signal a potential for certain funds to be promoted above others based on financial incentives.
He said: “There is potential for conflict in allowing marketing or advertising on platforms and yet not inadvertently promoting specific funds over others.
“There needs to be clearer definitions on what is acceptable and what is not. At the moment, from our point of view, I find it very difficult to see how this can be done in a way which does not create bias. The fact the regulator put it in the platform paper showed it was thinking about it.”
But Fidelity head of business development and strategy Ed Dymott stressed the need for carve outs such as these if a lopsided business model is to be avoided.
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