The Financial Conduct Authority has said financial advisers will be responsible for ensuring the platforms they use comply with regulation, in a move that one industry expert has said will make intermediaries’ lives “quite a lot harder”.
In its platform paper published this morning (26 April), the regulator reveals that it will fall to advisers to conduct due diligence of the platforms they use to make sure they comply with regulations.
The paper states: “In order to prevent firms circumventing our policy approach, we will ensure that an adviser firm cannot use a platform service provider in relation to a personal recommendation to a retail client unless it has satisfied itself that the relationship with the platform allows it to comply with requirements applicable to the adviser firm in the UK.”
Mark Polson, founder of 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.”
Advertising payments from fund managers to platforms will be allowed under the new rules. The FCA admits in the paper there is still a risk such payments could be used to “the possibility of abuse... to influence distribution”.
The regulator adds that its handbook demands that such payments merely “reflect the service being provided and not vary inappropriately between different product providers” - and that it may consider further rules to ban “all payments” in the future.
Mr Poulson said: “They are going to require some disclosure from the platforms that they are not used to getting. Advisers are going to need some help with this.”
He added that this marks an opportunity for providers of support services to step forward with offerings designed to take this weight off the adviser’s shoulders.
The FCA paper adds: “To reinforce the additional measures we are introducing for advisers in this area, we will also ensure that platforms are prevented from presenting their platform charges in a way that offsets any adviser charges which are payable by the retail client.”
Additional reporting by Ashley Wassall.
