The FSA's proposed ban on fund manager rebates will "strike at the heart" of the platform pricing model and create an unlevel playing field, warns Tisa.
Responding to the FSA's RDR Platform Discussion paper, Tisa is calling for a more open dialogue on use of rebates to reach an outcome which both meets FSA requirements and helps consumers.
"Whilst there are some practices that may be considered undesirable, I am concerned that the proposed regulatory approach is fraught with potential unintended consequences," says director of portfolio and retirement planning Malcolm Small.
Specific concerns highlighted by Tisa include:
• A ban on rebates both from fund managers to providers and from platforms to consumers would strike at the heart of legitimate operating models and pricing structures.
• The focus on rebates for ‘advised' business rather than execution-only creates an un-level playing field with the prospect of platforms having to operate two different models.
• The possible ban on rebates from fund managers to platforms and from fund managers to underlying clients is not matched by any parallel proposal to restrict such payments from fund managers to life and pension fund companies.
• Banning all rebates - even when wholly and transparently credited to clients - would be likely to lead to the need to create multiple share classes for funds, reflecting the different commercial relationships involved.
• The ongoing treatment of legacy business has considerable potential for unintended consequences in adviser and platform behaviour.
Tisa's comments come as the big three platforms-Skandia, FundsNetwork and Cofunds- labeled its proposals as "unworkable" in their responses to the Discussion Paper.
The FSA aims to release a Consultation Paper on platform regulation over the summer with the final rules to come at the end of the year.
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