Platforms must prepare for sunset clause ‘challenge’

Some platform operators are only now beginning to confront the challenges and tax liability issues for customers attached to the withdrawal of trail commission, with less than 18 months remaining until a ban on rebates which will all but end payments, according to Altus.

This follows the FCA’s PS13/1 statement which was published in April 2013 and meant platforms must ensure all payments between fund managers and platforms is ceased for new business from 6 April 2014. A sunset clause allowed operators a further two years to phase out legacy rebates.

Altus consultant Ben Hammond said: “Although sometimes forgotten, the customer must be the central focus here. As with adviser charging, consent is required to set up new charging structures and this needs to be obtained as soon as possible [and] certainly from 6 April 2016.

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“That potentially creates some practical challenges for those who wish to keep their income flowing.”

A recent survey by Investec found that some 80 per cent of intermediaries believe that some advisers will struggle to fully complete the transition from commission to fee-based remuneration before the ‘sunset clause’ deadline.

The key reasons for the delay were failing to change their business model and fear of losing clients and revenue.

Nearly half cited administrative inefficiency and a third believed that some advisers are waiting for providers to stop trail commission altogether before making the transition, Investec found.

Mr Hammond said: “It is essential that platforms work closely with their advisers to sell the value of their service to customers and then transition them into clean share classes and adviser / platform charging.

“Some platforms have been running an explicit proposition for several years pre-RDR, possibly in parallel with a bundled offering and so could be fooled into thinking the task is easy.”