Blog: Gone forever... the notion of platforms as distributors

David Ferguson, CEO of Nucleus Financial Group, sees only good news in this week's platforms Policy Statement.

The FSA has delivered its long-awaited platform paper and my initial reaction is that the FSA has drifted back towards the direction of its earlier, transparency-obsessed paper.

That paper 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.

And the clear assertion in this week's paper that the "proposed rule COBS 6.1E.1R requires the platform service provider to clearly disclose the fee/commission it arranges to accept from third parties such as fund managers" is to be applauded.

With rebates being one of the most hotly-debated topics prior to the release of the paper, I imagine everyone would have welcomed greater clarity around the likely ban of rebates.

However, it appears to becoming more and more obvious that the use of rebates to influence client outcomes is considered inappropriate, and this is something I welcome very strongly.

We also think that the shift from provider-driven product-led sales models to client-driven advice-led business models is a beneficial change. Maybe it is even the great change?

It seems unlikely that a single platform can ever meet the requirements of all clients, a point the regulator has wisely clarified in the paper.

Those open platforms will particularly welcome the FSA's assertion that "an independent firm faces significant challenges in complying with COBS 6.2A.4AR and COBS 6.2A.4BG if they exclusively or extensively use a platform that only features products which pay the platform a rebate".

The FSA further states that it is not seeking an outcome in which advisers create an artificial spread of investments to meet the independence rule.

Indeed, the regulator points out the potential inefficiency for IFA firms in using more than one platform. It looks like advisers who responsibly use one wrap platform for significant segments of their (perhaps broadly homogenous) clients will be able to continue as today. Again, all positive news.

Whatever else, what has emerged today in PS11/9, is a step forward for transparency and should forever banish the notion of platforms as distributors.