Be prepared… FundsNetwork head David White says the FSA's consultation paper on platforms held few surprises - but argues RDR II is now a reality
After months of anticipation and debate, the Financial Services Authority’s (FSA’s) recently-released platform consultation paper has brought a welcome degree of clarity that should help the industry move away from speculation and towards implementation.
In truth, there were few big surprises in its latest communication – despite some earlier mind-changing; we already had a fairly good idea that the FSA was not favourably disposed to payments from fund managers to platforms and cash rebates from product charges to consumers.
Now, having given itself more time to contemplate any potential ‘unintended consequences’, the FSA has merely confirmed what had generally been expected by most industry participants.
RDR II is now a reality
The banning of fund manager payments to platforms (both advised platforms and non-advised) will, once and for all, do away with the FSA’s lingering suspicion (despite the full disclosure argument) that fund managers are somehow able to ‘buy’ distribution or ‘shelf space’ through these payments.
The banning of cash rebates to consumers, on the other hand, should help to alleviate the FSA’s concerns about the potential for lack of transparency and the possibility for commissions continuing to be paid in new guises.
Although it is proposed that cash rebates (and fund manager-to-platform payments) will be banned from 31 December 2013, the FSA confirmed that rebates that enable additional re-investment into products (i.e. unit rebating) will still be allowed.
An element of the FSA consultation paper which some observers might have found somewhat more surprising was the proposal to extend the RDR to non-advised or direct-to-consumer platforms.
More precisely, the FSA said it was consulting on ‘reading the rules across’ to these types of platforms.
The FSA said it was considering this in order to counteract the potential misconception among consumers that these types of platforms are free. If this proposal is adopted, then the previously-simple ‘discount broker’ proposition that offered customers ‘money back’ to customers will obviously have be reformulated quite radically.
Instead these firms would have to incorporate some kind of overt ‘fee’ into their business proposition and messaging, assuming that they wish to continue using platforms.
Looking ahead, it is worth remembering that the consultation period is not yet fully completed and there are bound to be some areas which might need refining or further clarification.
As one clock stops ticking, another begins, and as an industry we now need to focus on our plans and delivery timelines for RDR 2.
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