Cash rebate ban will hit consumers hard, says Aifa
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Aifa has accused the FSA of a “glaring omission” in its platform payments consultation paper, claiming the regulator has not properly assessed the full impact on consumers.
In its response to the FSA’s June consultation CP12/12 on payments to and from platforms, Aifa said: “The incremental costs that will be borne by the platform operators and fund managers will ultimately be passed on to investors.
“When added to the charges for disposal of units and the implications of capital gains tax, the proposal that fund managers rebate units to investors would be a costly alternative to current cash rebates.”
The FSA has proposed prohibiting providers from giving cash rebates to clients, claiming that such payments “hinder transparency and potentially provide a mechanism for commission to continue being paid”.
The regulator’s thinking is that as cash accounts held on platforms can be used to pay adviser fees, fund providers could still determine how much advisers receive through how much is paid into the account.
Instead, platforms will be obliged to repay any rebates as units of existing investments, which is likely to require significant investment in operating systems.
In addition, Ed Dymott, head of business development at Fidelity, said the FSA needed to expand its payment rules to cover life insurance products and self-invested personal pensions (Sipps).
“The FSA’s approach to platforms could be to the detriment of consumers,” Mr Dymott said. “To achieve good consumer outcomes there needs to be a consistency of approach across all long term savings products.
“Narrowly focussing on platforms and excluding life insurers and Sipp providers is illogical [and] will lead to a myriad of pricing structures and approaches, which will do little to reduce barriers to investing.
“As an advocate of greater transparency, but also providing simplicity and good value, we are asking the FSA to really focus in on how they can improve outcomes for investors and encourage people to save more.”