Today's confirmation that cash rebates will be banned is a 'blow' to wrap platforms and presents a 'significant challenge' to their business models, fund supermarket Skandia has said.
In this morning's consultation paper, the watchdog confirmed its intention to ban cash rebates - payments from product providers to consumers via platform cash accounts.
Unit rebates used to purchase additional fund units will continue to be permitted.
Skandia, which cut itself adrift from fellow platforms by supporting the mooted ban on cash rebates in favour of unit rebates, hailed the decision by the FSA to press ahead with the ban a victory for consumers.
"Today's decision by the FSA is a victory for good customer outcomes over industry self-interest," said Skandia UK chief executive Peter Mann (pictured).
"Customers use platforms to invest in funds, not cash, so it is logical that any discount that the platform can negotiate for the customer should be paid into their funds rather than a cash account."
Mann added wraps now face a couple of 'major challenges' they were hoping to avoid.
"Firstly the liquidity created by cash rebates in customers' cash accounts has been removed, which is a significant change for their customers," he said.
"Secondly they are going to have to upgrade their systems to facilitate unit rebates and unit deductions to pay adviser charges."
He said most wrap platforms appear to have been more intent on changing the regulator's mind on the cash rebate issue than building an alternative solution.
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