TISA responds to FSA Platforms Consultation Paper
TISA is highlighting two major concerns in its response to the FSA’s CP10/29 ‘Platforms: Delivering the RDR and other issues for platforms and nominee-related services’ consultation.
Based on discussions with a considerable number of fund managers and platforms, TISA’s response is focussing on concerns relating to:
- Rebates from product providers to platforms
- Investing in authorised funds through nominees.
Malcolm Small TISA Director of Policy says:
“Ending the rebating of an element of a fund manager’s annual management charge in cash and restricting this to units or shares is disproportionate, will create operational difficulties and may well have the unintended consequence of derailing the platform registration programme.
“I am also worried that the means of delivering some of the more regular unitholder documents will be overly burdensome to the platform and to the client. It’s not untypical for a client to have a diversified portfolio of a dozen or more holdings and I question whether they really want semi-annual and annual reports for each as proposed in the consultation.
“There is much to applaud in the FSA’s consultation paper which demonstrates an increasingly detailed understanding of the developing wrap and platform market. However, from the consumer perspective these two proposals will add to cost, create confusion and ultimately lead to a bad consumer outcome which I know is not the FSA’s intention.”
In its response TISA details why the claim in the consultation that advisers may seek to misrepresent rebates as a deferment of agreed adviser charges does not stand up to scrutiny. All wrap platforms operating client cash accounts already clearly post credits and debits including fund rebates so that any confusion or misunderstanding by the client is highly unlikely.
TISA also point out that with most fund managers seeking to drop their annual management charge in the run-up to RDR, the level of rebate, whether in cash or units, is anticipated to fall to 0.25% which is unlikely to disguise an adviser payment fee more in the order of 0.5% to 1% per annum.
At a practical level a logical principle currently exists for the fund management rebate model which enables ready and accurate disaggregation by the platform back to the clients’ own account. Restricting rebates to units/shares will make this process difficult and subject to rounding errors.
Feedback to TISA suggests that the majority of wrap providers would favour the alternative proposal for a platform to insist on having a share class of the fund in question where the annual management charge was set at such a level as to remove the need for unit rebates. This would lead to different platforms holding different share classes of the same fund which would nullify the platform re-registration initiative and leave clients no choice but to opt for cash transfers.
Such a move would, in TISA’s view, cause more immediate and material consumer detriment than that which banning cash rebates was intended to address in the first place.
TISA’s full response document is available at: www.tisa.uk.com
Ends……
For further information, please contact:
Malcolm Small, Director of Policy, Mobile: 07989 500771 Email:malcolm.small@tisa.uk.com
Issued on behalf of TISA by Cauldron Consulting, contact Steve Radford – Tel: 020 3178 7238, Mobile: 07889 903786. Email: steve.radford@cauldron-consulting.com
Notes for Editors
The Tax Incentivised Savings Association (TISA)
TISA is the premier industry funded body in the UK retail savings and investment industry. By engaging with member firms, government, political parties, regulators and consumer groups TISA’s ultimate goal is always to further consumers’ best interests. It seeks to improve the range, features and quality of savings and investment schemes available whilst encouraging more people to save for their financial security and peace of mind.
Uniquely, TISA is able to articulate the opinions of the whole savings and investments marketplace through its membership comprising over 120 member firms involved in the supply or distribution of products. TISA’s remit extends across the broad spectrum of government sponsored savings and investment vehicles.