Ascentric's Thorman: the fight against rebate ban is not over

It has been a good couple of months for Hugo Thorman. His wrap platform Ascentric hit profitability in June, and in August the proposed ban on cash rebates was put on ice by the Financial Services Authority (FSA).

Thorman (pictured), who was the most vocal opponent of the proposed ban, said he was happy with the decision by the FSA to kick its plans ‘into the long grass’.

But he warned that wraps, which have pricing structures that depend on cash rebates, should not rest on their laurels.

Learning from previous mistakes

Thorman said wraps needed to learn from their previous mistakes. They took their eye off the ball in the summer of 2010 when, fresh from a FSA discussion paper slanted overwhelmingly in their favour, they allowed fund supermarkets to seize the initiative with intense lobbying of the regulator, he said. Following their campaign, the FSA made a U-turn on its plans to ban fund manager rebates and shocked wraps with its cash rebate ban plans.

‘They [fund supermarkets] must have lobbied incredibly successfully, and you have to take your hat off to them. We did nothing and were a bit cocky, dare I say complacent, not thinking we had to re-lobby the FSA once it had come to what we thought was the right decision,’ he said.

Given this experience, Thorman said it was important to highlight that the switch to unitised rebates, which would result from the cash rebate ban, would be damaging to consumers.

‘It is inconvenient having to change the system, but it is more inconvenient having to change the system for no benefit to anyone,’ he said. ‘It might benefit the FSA, but it will not benefit clients. It doesn’t make any sense and you can’t explain it. We are going to have clients asking us questions, asking their advisers questions and advisers asking us questions. All we are doing is driving up the cost of providing this service, which should to be automated.’

Overwhelming opposition

Thorman said the FSA should not ignore the overwhelming opposition to the cash rebate ban, pointing to Skandia’s lonely position as the only platform in support of the regulator’s stance.

‘The idea that you can pay unit rebates is so naïve, it’s no accident that there’s only one provider that has come to that conclusion [in support of the regulator],’ he said.

‘Why are we doing this: because some in the FSA and Skandia think that IFAs offset their charges against the cash rebate? That is not saying an awful lot for the intelligence of customers, nor for the morality of advisers.’