Sesame calls for platform unbundling

The UK’s largest adviser network has come out strongly in support of an unbundled charging structure for platforms – but warns providing too much information to consumers will be “counter-productive”.

In its response to the FSA's platform discussion paper, Sesame Bankhall welcomes the regulator's focus on transparency and says the move towards unbundled charging is an "essential" part of adviser remuneration practice.

"If you put the RDR and platform paper side-by-side, you reach the conclusion an unbundled structure is highly desirable and almost essential in order to comply with adviser charging," says chief operating officer Stephen Young (pictured).

Young says there should be a clear breakdown of how much the consumer is paying for funds, the platform and advice.

"We absolutely, passionately believe an unbundled pricing structure is the right way forward," he adds. "With a bundled charging structure the consumer cannot see what they are paying for and it is unclear what the actual charges are. It is very important consumers clearly understand what they are paying for and the service they are getting."

But Sesame thinks anything beyond the three-way breakdown between fund, adviser and platform charges is unnecessary and runs counter to the drive towards greater clarity.

"The group believes there is a tipping point for consumers with financial information and going beyond the basics of how much they are paying for the funds, how much for the platform and how much for advice could prove counter-productive," states the firm's official response.

It says some platforms currently provide too much detail about charges which is "overly complicated and potentially confusing" for consumers.

Young rejects the argument an unbundled regime will raise charges for the end client and says unbundling will create a level playing field leading to increased competition between providers.

The Sesame chief also thinks there is "a good argument" for allowing fund manager rebates to continue - as long as they are passed back to the client and clearly expressed as rebates.

"The only reason people will have for continuing the practice of secret rebates is to keep them for themselves," he says.

Young says the ability of consumers to move assets freely from platform to platform is vital for competition and welcomes the efforts of a Tisa-led industry group to get a system in place by next year.

"We will not use any platform unless they have a clear commitment to bring in re-registration as soon as possible." 

Citing the example of the Australian market which has seen a sharp reduction in the number of platform players, Young says it is possible that in five years time only five platforms will be operating in the UK.

"If you are using a platform that cannot continue you will need to move your assets and this underlines how vital re-registration is."

In its discussion paper, the FSA made it compulsory for platforms to offer re-registration by 31 December 2012.