Plenty of work to do for the journey of transformation

The Financial Conduct Authority published policy statement 13/1 a few weeks ago and it was a disturbing paper in lots of ways. It disturbed the development schedules of lots of platforms, and it certainly disturbed a lot of finance directors whose world from 2016 just went a deeper shade of red than it already was.

The statement, Payments to Platform Service Providers and Cash Rebates from Providers to Consumers, also disturbed customers – those poor fools putting their money and their trust in us all – who will have to get used to a new way of paying for advice on past business as well as new.

But this is a paper for financial advisers – the clue is in the title – and PS13/1 disturbed you perhaps more than anyone as it reached into the heart of your businesses and gave it a good old poke. And this is our subject for today.

We shall start by taking a look at some specific challenges linked to the statement itself.

First, we have the switching off of all trail commission from 6 April 2016. Not a complete surprise, perhaps, but combined with the fact that doing just about anything with a customer’s portfolio from 6 April 2014 will force the switching off of trail anyway (excepting auto-rebalancing arrangements set up before 6 April 2014), this adds serious impetus to the business transformation plans of anyone making the transition from commission to adviser charging. Get that deadline on your white boards now. And also bear in mind this clear statement of intent from the FCA (see p.16 of PS13/1): “We do not expect firms to wait until 6 April 2016 to move all customers with legacy assets to the new charging structure. We would expect most customers to have been moved to an explicit charging model before then.”

You have been warned.

Second, we indeed saw the well-trailed banning of cash rebates unless they fall below a de-minimis limit of £1 a month (because we know how kerr-azy customers can go with rebates of £1.01). Along with HM Revenue & Custom’s decision to tax rebates of any kind outside a tax-wrapper, this is the final and quite deliberate slam of the door on using negotiated refunds of charges already paid to fund cash accounts that can be used to pay platform or adviser charges or anything else. From the FCA’s point of view that is the whole point really. So it will be a sell-down or a reach into the pocket. Those are your choices.