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AJ Bell says FCA should rethink platform rebate ban

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AJ Bell says FCA should rethink platform rebate ban

AJ Bell has called for the Financial Conduct Authority (FCA) to re-examine the ban on cash rebates from fund managers to platforms as part of its investment platform market study. 

The FCA today published the terms of reference for its study into the platform market.

The study will in part look at how platforms use their bargaining power to ensure better offerings from fund managers on behalf of their users.

'We will assess the ability of platforms to negotiate on upstream investment charges by comparing how different funds are priced on different platforms and other distribution channels. This will include taking into account the cost of the platform and the overall investment cost relative to other distribution channels,' the paper said.

AJ Bell marketing director Billy Mackay (pictured) said the regulator should consider relaxing rules on rebates introduced in 2013 following the retail distribution review if it wants platforms to get a good deal for investors.

'One key focus for the FCA will be ensuring platforms are positioned to squeeze the best possible deals out of fund managers on behalf of their users. As part of this, the regulator should re-examine the ban on the payment of cash rebates from fund managers to platforms,' he said.

'Provided cash rebates are paid 100% for the benefit of customers, unwinding this ban would enable platforms to use their scale to negotiate discounts for their customers.'

The ban on rebates for new platform business came into force in April 2014. Platforms were given until 6 April 2016 to extend this ban to legacy business. 

Mackay suggested reversing the ban would 'help re-instate a more competitive dynamic between platforms and the fund groups' and would therefore result in better outcomes for consumers by helping bring fund costs down.

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