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Platform rebate retreat is a welcome tweak to a flawed policy

by Daniel Grote on Feb 19, 2013 at 09:06

Platform rebate retreat is a welcome tweak to a flawed policy

The Financial Services Authority (FSA) is finally waking up to some of the flaws in its plan to ban platform cash rebates. The news that it is considering some concessions is welcome, although not as welcome as an outright reversal of the policy.

Despite the protests of most of the platform sector, it has always seemed unlikely that the FSA would ditch its plan, even though it has shown it is not averse to the odd U-turn or two over platform policy.

Having prolonged its platform reforms beyond the timetable of the retail distribution review, a further radical switch in approach would be too much to handle at too late a date. The fact that the platforms with the most work to do – Skandia, Cofunds and FundsNetwork – have been implementing changes based on the FSA’s current proposals suggests they do not expect any about-turns.

So it seems the interminable wait for the platform policy paper (first promised before the end of last year, now with no publication date even being proffered) is due to tweaking of existing policy.

An exemption from the cash rebate ban for small investment amounts will help to remove some complications. It will introduce some more in setting up two rebate systems, but presumably the FSA has judged that problem as less acute.

It could have avoided all of this had it not decided on the ban in the first place, but it’s a step in the right direction.

5 comments so far. Why not have your say?

markpolson

Feb 19, 2013 at 12:09

Dan, I don't disagree with you often, but the fact of a bit of a movement from the FSA (welcome) is more than undone by the detail of that movement (lunacy). How many clients will be getting some rebates in units, some in cash, with a crazily low arbitrary break point? Lots I bet. This ban exists to stop advisers monkeying around and hiding their charges inside the rebates. No adviser is going to be doing that for amounts less than, say, £100, and certainly not for less than the £10 suggested by TISA. The whole thing is nuts.

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Daniel Grote - Citywire

Feb 19, 2013 at 12:44

But isn't it equally ridiculous that platforms would be handing over tiny amounts in units under the untweaked plans? This is definitely a messy compromise, I agree. Cash rebates shouldn't have been banned in the first place - the problem of advisers monkeying around was never as great as the FSA pretended (and certainly not big enough to warrant the ban). Given that policy was never going to be rescinded, the fact it looks likely some concessions will be made is welcome. I guess my argument is that the messy compromise the FSA is proposing is slightly better than the messy result of the original plans.

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Dan Rear

Feb 19, 2013 at 13:03

I ain't got a clue what's going on here. Anyone explain to me in V simple terms, so I and my clients have a chance of understanding it all??

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markpolson

Feb 19, 2013 at 16:15

Dan Rear - nope. That's kind of the problem.

Dan G - they will be doing tiny amounts under the tweaked plans. Not much difference between 99 pennies and 101 pennies of rebate. I'm just not sure that this is better; certainly harder to navigate for clients.

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The Facilitator

Feb 19, 2013 at 16:41

I think it needs to be all or nothing both in terms of giving clarity to the market and giving the back office teams a fighting chance to deliver something.

All these compromises just heap more costs on the support infrastructure and, guess what, that all has to be paid for by someone.

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