FTAdviser spent a week gathering advisers’ most pressing questions on the effects of the new rules and put them to David Geale, the FCA’s head of investment policy and the man behind the policies contained within the paper. Here, we reveal his answers.
Q:How does the FCA respond to the argument that these regulatory changes will result in a higher total cost of investment to customers, especially those at the lower end of the market? It has already emerged that this is the case on some platforms.
DG: We are concerned that the current way that platforms are funded is opaque and makes it difficult for customers to understand how much they are paying for the platform service or to compare platforms. A platform charge will help ensure that consumers are clear about what services are being provided and how much those services cost.
Making the cost clear will allow consumers and advisers to compare different platforms and make a value-for-money judgement on whether a particular service is suitable. We believe that this will facilitate competition for the benefit of the consumer in the market and that this will be reflected in prices and services offered, since platforms will have to justify their charging structures.
This increased level of transparency will inevitably create a more competitive market
As all charges will be disclosed upfront and agreed in advance, consumers will know exactly what they pay for the service they receive. This increased level of transparency will inevitably create a more competitive market in which both advisers and consumers can shop around for the best deal.
So, in the policy statement we made clear that we do not expect these policy changes to be used by the industry as a reason for increasing the fees they are able to receive and the improved transparency in pricing and in competition should help ensure this.
Q:Does the FCA intend to abolish existing adviser trail commission on platform business by April 2016 in line with the ban on legacy rebates, or will platforms still be allowed to pay (‘pass on’) trail on existing business? If it is the FCA’s intention to abolish trail on platform business has it calculated the percentage of the industry they expect to cease trading?