bundled, unbundled?

clearly platforms prefer rebates to continue but is this to the detriment of one of the RDRs priciples," removal of product bias?" continued rebates even into a clients cash account creates a bias towards those products which can offer this verses those that cant ie ETFs, investment trusts etc. I disagree that a clean price negates competion. With a clean price fund managers will compete clearly with each other on price and some vanilla funds will no doubt be much cheaper than they are today if priced cleanly. Non advised business will almost certainly remain as it is today, it will be cheaper than advised but why shouldnt it be, its the consumers choice.Re reg should not be too much of an issue as when most groups decide their price for each fund this is likely to be replicated across the major platforms.

Posted by: Neil Bridge

Let's stop prattling

There is an assumption by the FSA, by Skandia, and by Neil Bridge that cost is the main driving factor in choice. To my mind the main selling point of a platform is the ability to deal easily in a wide range of funds whether that is directly or via an adviser. Therefore two other factors come into play, namely, ease of administration and range of choice. Cost on its own is not the sole, or even main factor. It it were Waitrose would not exist and Tesco, Sainsbury and others would not carry premium products. Who, in their right mind, would buy an Aston Martin when they could get a Ford Focus? The Regulator and the Providers are fixated on measurable topics because they can't cope with the immeasurable problems that consumers are trying to address. Who gives a monkey about 0.1% saving in costs, when the appropriate solution saves clients £1,000s in the longer term. Perhaps factory pricing would be better - so we have less irrelevant prattling. The only time rebates become a meaningful topic is if they are of such a size they are serious skewing the market place. I may be wrong, but I don't see that happening at the moment.

Posted by: Glen McKeown

Facts or fog?

There is a lot written by platforms about how there will be client detriment from the FSA proposals but little real evidence of this. Neil Bridge makes some excellent points that I would like to add to. As for costs Glen, compound it up (not forgetting they are deducted EVERY year not just the first), they are material in anyone's book. Under a complete ban the fund managers would be competing amongst themselves to keep prices down. The good ones can charge more. The bad ones would have to charge less, up their game or disappear. Into the fund 'price' would be factored distribution and marketing costs - payments to platforms would come out of this. So, no more fund managers buying distribution and product influence from platforms based on volumes of sales and with the cost deducted directly from a client based on how much they invest and keep on the platform. It would also be simple for everyone because only two share classes would be required, direct and platform/wholesale distributed. The platform share class would be priced to the greatest cost and if cost savings can be made by parking admin or other outsourced aspects with platforms then there's nothing to stop payments being made accordingly. If platforms are adding value then fund managers and/or clients will pay for it and survive, but shouldn't the users be able to judge that for themsleves? As an added bonus it makes direct comparisons across different asset types a lot simpler. Ultimately a ban will result in a clean system for the client and adviser with plenty of competition between fund managers. So what happens if the status quo is maintained? This is not really compatible with what the RDR is trying to achieve. Whatever label you want to use, these payments are commission. The money is pre-determined and taken directly from the client investment, based solely on the size of the 'sale and retain'. Client rebates would largely nullify the RDR aspect of client agreed charging. Like it or not, advice would be presented as being largely 'free' because of the rebates, hardly RDR compatible. Which brings us to the last option of rebates allowed to platforms but not subsequently allowed to be passed to the client. And remenber, the cost/rebate is ongoing, where's the ongoing benefit to the client? This is surely a lose-lose scenario for the client and adviser. Under this scenario the retail price will be set by the fund manager, so no competition there unless we revert to one share class per fund per platform, clearly unworkable. What we end up with is a cosy cartel between the fund managers and the platforms, simply left to haggle in the background over the split of the spoils. If that wasn't enough there's a much bigger problem that also applies to the status quo option as well. What about vertically integrated platforms, i.e. firms that operate a platform but also give advice? Under the current RDR arrangements they will be receiving commission contrary to the proposals. Do you exclude them from receiving the payments? Hardly fair or in keeping with competition. And what's to stop firms creating their own platform alone or in groups (and existing ones hiving this off into a separate entity)? There would be an expansion of platforms/wraps along with firms applying for client money permissions - would the FSA want or countenance that? As a last thought, shouldn't platforms also have to state whether they offer an independent service, covering all funds/asset classes, or a restricted service that only offers certain fund groups or asset classes? It is diificult to envisage how an independent adviser could justify utilising the latter. The FSA must stay focussed and not be swayed by unsubstantiated shouting on either side of the argument. The time has come to cut through the fog and make the tough decisions that will achieve the RDR objectives. The FSA can't afford to get this wrong for clients or themselves...

Posted by: Norman Masdik