Skandia hits out at FSA over cash rebate ban delay

Skandia has criticised the Financial Services Authority’s (FSA) decision to delay the implementation of the cash rebate ban, and claimed the delay creates uncertainty for platform operators.

The platform policy paper, which was published yesterday, confirmed the FSA’s intention to ban cash rebates and fund manager payments to platforms in principal, but it delayed their implementation until after the retail distribution review (RDR) deadline of 31 December 2012.

Skandia said: ‘Whilst the deadline for implementing the final platform rules remains unclear, the policy statement suggests that the platform consultation and RDR implementation date have been de-coupled. This is less than ideal for platform operators who are already building RDR-ready platform services and will have to continue these developments with uncertainty around what the final platform rules will be.’

Skandia was the only major platform to back the FSA’s decision to ban cash rebates when it was announced in November 2010.

Skandia also said it understood the FSA’s decision to ban fund manager payments to platforms despite being one of three fund supermarkets, along with Cofunds and FundsNetwork, which get paid via this business model.

The Old Mutual-owned platform provider said it was building an unbundled charging structure and so could survive under the FSA’s proposals.

It said: ‘The FSA’s desire to ban provider payments to platforms causes no issues for Skandia and it can understand the thought process and rationale behind it.  As part of the Retail Distribution Review and in line with adviser charging, the platform market has an opportunity to deliver transparent and understandable charging structures to investors. 

‘Skandia believes this will best be delivered by fully unbundled charging structures that separate the costs for fund management, platform and financial advice.’

‘Skandia is already well down the road in developing a new charging structure that will pass rebates in full back to customers, facilitate transparent adviser charging and be ready well ahead of the proposed RDR implementation date. 

‘This preparatory work gives Skandia the confidence that it can accommodate unit rebates if necessary, whereas other platforms only have one operating model, either based on a bundled charging structure or cash rebates, and will have to invest heavily to be able to accommodate unit rebates, thus potentially limiting further innovation.’