Today’s platforms paper…condensed

Today’s long-awaited FSA platforms paper addressed – if not resolved – all the key issues affecting product providers, platforms and distributors.

As usual with Policy Statements from the regulator, there was a lot to take in, but here IFAonline has pulled out a dozen or so key paragraphs which may (or may not) provide clarity to your business.

First up...

Independence

The FSA said advisers need to take into account whether being on a platform is in individual clients' best interests. It expects advisers to be able to demonstrate why using a particular platform is suitable for individual clients.

It said it feels an adviser with a wide range of clients should not take the view that a single platform will be the right solution for most of them. This is unlikely to meet its independence ‘rule', it said.

But it stressed it is up to the adviser to choose which platform(s) to use. It has also updated its examples of good and bad practice.

Cash rebates from providers to clients

Now then: The FSA said it is highly likely to stand firm on this - i.e. these payments will be banned - but it has not set any rules. It accepted there could be unintended consequences of this move which "are not yet fully understood".

However, it maintains it does not feel it would be desirable, once the RDR rules are in force, for providers to pay existing commission into a client's account which is then used to pay the adviser charge. This has the potential to distort the market, it said.

To quote today's Policy Statement, it added: "We felt it was telling that some firms argued that a cash rebate was necessary to fund the adviser charge, as this was precisely the behaviour we would be concerned about."

The FSA said it did not accept that the payment of rebates in additional units would be impossible.

Payments from product providers to platforms

The FSA appears to be back where it started on this one. Fair play - it has at least listened to the concerns of stakeholders.

The regulator's initial proposal, back in 2009, was to ban payments from product providers to platforms, because "possible consumer detriment" had been identified. Then, in a paper last year, it said that, while it still had concerns about these payments, it was unlikely to ban them.

Now it plans to outlaw them again but, as with cash rebates, it has not set any rules.

Today it said it agreed with the views of the Consumer Panel that these payments "hinder transparency". It said it feared they could also lead to product bias remaining in the market.

But it said it needed to consider how such a move would impact platforms' business models and consumers. It will announce further work in this area shortly.

Re-registration

The FSA seems very happy to leave the baton with the Tax Incentivised Savings Association (TISA) on this one. It reiterated its view that it does not think it is appropriate to set prescriptive rules regarding timescales for re-registration at this stage.

Other

The FSA confirmed product providers such as life companies, as well as SIPP operators, will not fall under FSA definition of a platform service.

However, it will include firms which undertake services, such as custodian activities, on behalf of other firms plus execution-only dealing services and ISA managers.

Elsewhere, the FSA said it will ensure platforms face the same requirements as product providers if they facilitate payment of adviser charge.

It said it considers the payment of adviser charges from a cash account on a platform as a "potentially good way of increasing transparency".

How it is funded will be key. The FSA said unit cancellation should not be used if it is not in the clients' best interests and warned it would be keeping an eye on this.

For more coverage on today's platform paper, click HERE.