Wraps and supermarkets at odds over rebate ban

This rebate business really is a red herring. If your proposition, business size and client base is right for a platform then you should be able to use it and enjoy the benefit of the large rebates. On Skandia there is no up front bias. You can get into every fund at zero. I accept that amc's may not be negotiable, but if you are chosing sensibly this should not be an issue. The Transact style model is ridiculously expensive for a smaller IFA's client, and I would urge the IFA community to really stop and think before being swept along with the latest fad. Choice is GOOD Folks!

I think that the difference in cost is even greater than stated in the article. Unbundled wraps/platforms charge a different amount depending on the fund value. In many cases, the wrapper charge for a small investment would be at least 0.5% per annum and might even include fixed charge. The reason being that you can't take advantage of economies of scale under an unbundled system as you can in bundled. All that this will do is make it much more expensive for clients with smaller portfolio to access the efficiencies platforms offer. Wealthier clients are already served by unbundled services such as Novia/Transact/Nucleus etc, as Darren states, why reduce choice.

Agree with both comments above.

I cannot see the benefit to the client of either adding the cost and complexity of a cash account to their product or discouraging discounts.

I often wonder if this again is a small number of high profile IFA businesses trying to make their own propositions more competitive by raising the cost of the cheaper competition offerings at the expense of the client.

Skandia Investment Solutions can provide total costs for a £50k investment portfolio including 0.5% adviser fee for around 1-1.07% total annual charges. No full Wrap can match that.

The big boys own wrap offerings cannot compete with this coming in at nearer 2% some are much higher, likewise Transact is more costly too.

It would suit many business models to even this up a little with assistance from the regulator and it would be much easier to justify their stacking of client's money in to their one own offering.

I'm not sure that you have looked at the true cost of the Fundsupermarkets you are using. Fundsnetwork and Skandia are not 'cheaper' than the true wraps when you look at the total expense ratio and yes wraps can offer portfolios at just over 1%, but any such asset collection would be tracker funds & ETFs, can either of the others offer these?

Create a level playing field for investors at the fund level, so they can choose which additional services they want to buy from their advisers. It really is very simple indeed.

All this talk about the costs increasing for the end user assumes one major significant point - that the platform protagonists will remain as is i.e. no new entrants. Transparency of pricing and removal of ridiculous "favoured nation" clauses will even the playing field up allowing competition to increase - generally in this case prices shouldn't increase. New entrants who can compete without buying in business through opaque commission structures and without unwieldy head office overheads and legacy books will prosper.

There is no reason, other than people (platforms) retaining existing profit margins, for the cost of the total proposition to increase. Not every business will pass the cost of market participation back onto the client.

If a business can't deliver its product competitively then it fails - simple as that. It is no wonder that there are some parties making some pretty desperate please at the moment.

We recently started to use a platform and the rebate forms part of the illustration we provide to clients. I have to be able to quantify the extra cost or, indeed, the reduced cost of using the platform as opposed to a direct investment, I mainly refer to mutual funds in this case.

There is no bias from me, the platform or anybody else. Each invested amount must stand up on its own merits. I can't see any client being disadvantaged by receiving a rebate in this way. Can anyone tell me what I seem to be missing. I mean, the FSA object to everything, so what's new?