FCA: Platform transfers will not end client cash rebate

Cash rebates paid to clients for legacy business held on-platform will not end as a result of assets being re-registered to another operator, so long as there are no fundamental changes to the investments, the Financial Conduct Authority has confirmed.

In its second quarterly consultation paper since the split of the Financial Services Authority in April, the regulator confirms its intention to allow cash rebates to clients to continue despite a sunset clause for legacy rebates from providers to platforms. It has originally stated its intention to publish such a clarification in a note to trade bodies in July.

The proposed rules will mean that while cash rebates from providers to either platforms or clients on new platform business must cease from April 2014 and legacy cash rebates from providers to platforms must be stopped by April 2016, payments directly from providers to clients relating to legacy investments can continue.

Article continues after advert

The rules do not affect ‘de minimis’ cash rebates of less than £1, or unit rebates.

The FCA says it is publishing the guidance following “queries from the industry”, which “have shown that guidance similar to that for payment of trail commission to advisers... would be helpful”.

It offers examples of when cash rebates would be able to continue, including where a client’s assets are transferred, or ‘re-registered’, to another platform provider but are left “otherwise unchanged”.

Other examples of circumstances that would not prompt client rebates to cease would be where:

• no change is made to the client’s investment or to the level of a regular contribution;

• the client’s investment or regular contribution is reduced;

• the client’s investment is transferred from accumulation units to income units or vice versa;

• part of the client’s investment is switched between funds within a product wrapper such as a self-invested pension or Isa; and

• the product is converted to a share class which does not pay a commission, remuneration or benefit of any kind to a firm and is otherwise unchanged.

The FCA also clarifies that the rules on rebates, in combination with the original RDR rules, would mean payments from product fees must end for on-platform execution-only business and all off-platform advised business, meaning only execution-only, off-platform business is excluded.

Mike Kellard, chief executive officer of Axa Wealth, said: “It always seemed strange for the platform paper to allow a platform that wants to keep the rebate for itself to be able to continue doing so for another two years but those who want to return the rebate to the customer must stop doing so by April 2014. This appeared to be an unintended consequence of the platform paper, and we welcome the clarification of the FCA’s stance.

“We fully support the introduction of explicit charges for platform services but this should be done in a uniform way, not in a way that will disadvantage those providers, advisers and clients that have embraced a transparent approach.”