PlatformsMay 2 2013

Moody’s: Platform paper ‘credit negative’ for providers

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ByNick Reeve

The FCA’s policy statement on payments to platforms will be “credit negative” for platform operators, according to credit rating agency Moody’s.

Platforms will be forced to stop accepting legacy payments from fund managers from April 2016, a vital source of income for platforms such as Skandia and FundsNetwork.

But Moody’s said platforms would also suffer from the cost of implementing the changes, forecast by the FCA to be roughly £60m initially and £15m a year ongoing costs. In addition the credit rating agency said a renewed focus on fees would bring about downward pressure on charges.

Moody’s said: “In the current prolonged low yield environment, fees will become an important differentiating factor for investors.

“As a result, the new rules are credit negative for online fund platform providers because they will promote competition among platform providers, putting downward pressure on fees and driving up competition-related marketing costs in the pursuit of assets distributed on platforms.”

Moody’s currently only rates bonds issued by FundsNetwork’s parent company Fidelity and Cofunds’ parent company Legal & General. Both have been rated as investment grade.