Payments from fund managers to platforms for purely advisertising purposes will be allowed under the new FCA rules, as long as the payment do not influence how the managers’ fund is promoted.
According to the FCA’s platform paper, payments for advertising should not be used to help a product provider gain access to a shortlist of funds, influence any ranking of products or otherwise result in a channeling of business to that product provider.
The regulator adds that its handbook demands that such payments merely “reflect the service being provided and not vary inappropriately between different product providers”.
It continues that it will monitor how payments are being used and if it detects abuses that contravene the spirit of the rules and that it may consider further rules to ban “all payments” in the future.
It states in the paper: “We recognise that allowing the above payments gives rise to the possibility of abuse so that providers may still have the potential to influence distribution.”
Bill Vasilieff, chief executive officer of Novia platform, warned these new rules could create a conflict of interest on platforms which offer any sort of “structured architecture” such as top fund lists.
Mr Vasilieff said: “As the income from legacy business disappears I can see the bigger platforms asking for advertising revenue. If you run any sort of guided architecture you have got a potential conflict of interest.”
One such firm is Hargreaves Lansdown, which boasts Wealth 150, a list of funds which it considers the “best funds across all the major sectors”.
However, Hargreaves Lansdown chief executive officer Ian Gorham said: “We have no current plans for carrying paid advertising.”
However, in a twist that will raise the hackles of some advisers, checking whether or not a platform is compliant with the new rules, including in regard to advertising payments, will fall on intermediaries where they use platforms to place client business.
Mark Polson, founder of consultancy The Lang Cat, said: “Advisers have to check that the platforms they are using are compliant with these new rules. How’s that for due diligence?
“Their lives just got quite a lot harder. Platforms will obviously try to help advisers by saying ‘we comply with all the rules’, but where platforms are sailing close to the wind by for example accepting advertising, the adviser is going to have to highlight the risks to clients.”
