Fidelity ‘confident’ FSA will relent on cash rebate ban

Ed Dymott says Fidelity is actively lobbying the FSA to re-think its proposed cash rebate ban and is “confident” the regulator will pay heed to the platform community’s concerns.

Fidelity’s head of UK fund partners revealed the platform is lobbying the FSA with the same intensity as its efforts to overturn the planned ban on fund manager rebates and is hopeful a “working solution” will be found.

“The FSA now well understands the issues raised and I am confident we will see a response addressing these issues in the policy statement,” said Dymott. “Whether or not we get a full reversal I don’t know but I think we will get a cost-effective way of dealing with these issues.”

These include the cost of processing tiny unit rebates, the fact platforms can still offer cash rebates on non-advised sales and complications arising from the spreads on unit trusts.

He also pointed to the potential difficulty of rebating customers who opt to leave a platform in the form of units rather than cash.

“These are the details we are trying to work through with the regulator,” he said.
The FSA set out its proposal to ban cash rebates in its November consultation paper, with the unexpected move triggering a big backlash from a platform community incensed by the plan’s complexity and potential for customer detriment.

All major platforms - with the exception of Skandia – urged the FSA to rethink its proposal in their responses to the paper as the prickly issue served to unite a platform community usually firmly split across the wrap and supermarket divide.
The FSA is now expected to release its policy paper setting out final rules in June or July.

Dymott said Fidelity has been engaging with the regulator both on its own and as part of the Platform Group as it looks to achieve a satisfactory solution for consumers.

He said whilst the platform understands the regulator’s drive to improve customer outcomes, there is a mismatch between its objectives and the ultimate outcome.

“As an industry, we agree with their concerns - but not their solution.”
Fidelity’s engagement with the FSA comes after the fund supermarkets launched an intense lobbying campaign against the controversial proposal to ban fund manager rebates last year - a campaign proving ultimately successful.

Dymott is hoping for a similar outcome with the FSA’s latest initiative.
“We are doing as much work on cash rebates as we did with fund manager rebates - it is the same level of issue.”

Last month, AIFA joined the growing chorus of industry players setting out their opposition to the FSA’s proposal to ban cash rebates.