Underwhelming and sub-optimal: Industry reacts to FSA platforms paper

The FSA today published its Policy Statements on platforms, with the delay in setting rules on cash rebates the surprise outcome...

Here's a flavour of the reaction from across the industry on the FSA's latest proposals:

Gordon Greig, platform director, Aegon

"Unfortunately, today's policy statement fails to give us clarity on cash rebates, making it very hard for the industry to ready itself for the RDR.

"The FSA decision to carry out further research highlights the real difficulty of squaring an ‘in principle' approach with one that will benefit consumers in practice.

"A complete ban on cash rebates would have been highly detrimental to both platform providers and consumers. The FSA appears to accept this, and we hope it will now work with the industry to develop a solution that works for all parties."

Gary Shaughnessy, UK managing director, Fidelity International

"After such a significant delay, the publication of today's RDR Platform Policy Statement is underwhelming. Its conclusions which in the main will lead to more consultation are not good for consumers, not good for advisers and not good for the industry.

"As an industry the priority was to now move into implementation, but instead today's outcome will simply lead to yet more debate, more consultation and even more cost.

"Clearly the rules maintain a status quo for now which may simplify the implementation but it draws no conclusion for some of the longer term questions the industry has been asking."

David Ferguson, chief executive, Nucleus

"My initial reaction is that the FSA has drifted back towards the direction of the earlier transparency-obsessed paper which advocated the banning of all rebates from fund managers, encouraged platform-to-platform re-registration and was a significant threat to the business models of fund supermarkets.

"The challenge for fund managers, product providers and platforms is to recognise the magnitude of the shift and particularly that the days of commission and kickback-driven operations are numbered.

"Although we are yet to see where the detail takes us to on fund manager rebates, the FSA appears to have tilted the market in favour of transparent, genuinely open businesses that are set up to deliver better client outcomes."

Ronnie Taylor, retail managing director, Standard Life

"We welcome confirmation that an adviser can operate on a single platform for the majority of investment business, and the change to voting rights. However we are disappointed that the debate on payments to platforms and cash rebates has not been resolved.

"We will now progress with implementation and supporting advisers through the changes they'll need to make for 31 December 2012.

"We will work closely with advisers to support them to ensure changes are made with minimal impact to their day to day business."

Adam Phillips, chair, Financial Services Consumer Panel

"We are very pleased to see the FSA has listened to the Panel's call for a rebate ban, but disappointed no firm date for implementation has been set. A ban will ensure the principles of the Retail Distribution Review are not compromised by platforms.

"We want to see a platforms market where choice, access and value for money for consumers are essential components. Rebates can create bias in favour of more costly products and a potential mechanism for advisers to receive commission. Banning them is the right move.

"Given the delay in implementing the ban, it is vital the FSA steps up its supervision activity to ensure that consumers are protected during the transition period. Any further business model analysis must be conducted quickly so that the ban can be put in place as soon as possible."

Martin Bamford, managing director, Informed Choice

"It is interesting to note that around three-quarters of those who responded to the FSA proposal to ban cash rebates disagreed with this proposal. It is disappointing to learn that the FSA does not feel any of these objections to a cash rebate ban should prevent them from proceeding with such a ban.

"Unless all retail funds stop bundling their charges, and stop including the platform and adviser charge in their annual management charges, creating new unit classes for funds and cancelling units to fund platform or adviser charges will be a logistical nightmare.

"Instead, the FSA should simply introduce a rule which means all platforms and advisers must disclose what is paid to the fund manager, platform and adviser. Good advisers are already performing this level of disclosure."

Andrew Power, lead RDR partner, Deloitte

"While the paper provides clarity on a number of matters, the major issue around cash rebates is not finalised, thus firms are going to have to make progress based on informed judgements rather than absolute certainty, if they are to meet the regulator's deadline.

"The bottom line is that action cannot be deferred and, now, the onus is on careful planning and speed to execution.

"In order to meet deadlines, platforms will need to focus on the simplification and standardisation of their approaches to tackle the operational issues related to handling unit rebates, corporate actions and re-registration."

Ian Sayers, director general, Association of Investment Companies

"The best long-term and sustainable model for consumers and advisers is one where there is an explicit charge for advice, an explicit charge for the funds and an explicit charge for the platform, all agreed and paid for by the client. Only this model can create the kind of transparency required to prevent inappropriate incentives.

"The FSA appears to support this conclusion, which is welcome, and many platforms already offer this model, demonstrating that any practical issues can be overcome.

"Delaying the decision to ban such payments for a long time after RDR's implementation risks inappropriate practices becoming embedded which will be harder to unwind at a later stage. We urge the FSA to commit to a timetable to moving to this model as soon as possible after RDR."

Tony Stenning, head of UK Retail, BlackRock

"It is critical the system implemented is simple, transparent, provides a level playing field and has longevity. It is also incumbent upon all of in the industry to educate consumers and help them to understand that advice needs to be paid for.

"While we are disappointed that a conclusion hasn't been reached by the FSA as to how these payments are made, we understand there are huge ramifications for the industry and consumers alike.

"Whatever system we end up with has to be simple and easy to understand. The biggest unintended consequence is that we create a transparent framework that is so complex that consumers do not understand the charging structure.

Stephen Gay, director general, AIFA

"Giving further consideration to the impact of banning cash rebates demonstrates FSA's willingness to listen to the industry in some areas and is a positive step.

"However, the RDR is too important as a project to risk a poor implementation, and the change in FSA's approach to independence could impact on proposition decisions being made by firms over the coming eighteen months.

"This lack of clarity only adds weight to calls for delays to RDR in areas where the industry is not ready, and the FSA is unable to provide confidence about effective implementation."

Mike Eaton, RDR lead partner, KPMG

"The long-awaited FSA policy statement has not provided the industry with the clarity they had hoped for.

"The paper gives some further details on re-registration and the provision of information to underlying investors but significant uncertainty remains over provider payments and cash rebates. The FSA states a clear desire to ban both product provider payments to platforms and cash rebates to customers.

"This announcement serves as a wake-up call for any platform providers who have been waiting for either clarity, or an about turn, from the FSA. Now is the time to plan for the banning of product provider payments and cash rebates."

Stuart Fowler, head of investment, Fowler Drew

"The FSA readily admits ‘any future changes will have an impact on firms' business models, and that they will need time to adapt their systems; it is absolutely right that they should be given time.

"This is analysis that should have been completed at an early stage of the RDR process, before decisions were made, so that all the changes could have been implemented with due notice at the same time.

"When the Treasury Select Committee called for a year's delay, they did not suggest the FSA needed the extra year to ensure its platform policy was decided in good enough time for firms to adapt their systems and prepare practices. This would have been a better reason than allowing more time for a minority of advisers to get ready."