FSA platform paper delay

The Financial Services Authority (FSA) is delaying the publication of its much anticipated paper on investment platforms until the third quarter of 2011.

In their latest Policy Development Update, the FSA explains it needs to postpone its response to Consultation Paper 10/29, which was published in November 2010, due to the complexities involved in this area.

We suspect that this means the FSA is struggling to find a viable solution to their proposed ban on cash rebates within investment platforms.

The proposal to prevent investment platforms from using cash rebates to ensure investors pay the net cost of retail funds, with platform and adviser charges levied separately, was met with anger and disappointment from much of the retail financial services sector.

A cash rebate ban was proposed because the FSA thought there was some evidence of advisers using these cash rebates to mislead investors; somehow convincing them the cost of their advice was free because it was covered by the rebate.

Here at Informed Choice, we believe that cash rebates are the most transparent way for platforms to operate.

Rather than abolish cash rebates, in our response to CP10/29 we asked the FSA to consider instead introducing a requirement for all platforms, including wraps and fund supermarkets, to better disclose the constituent parts of their charges.

This would mean platforms would need to separately show the cost of the fund, platform administration and adviser charges, as well as disclosing the total charge for the investor.

If the FSA is delaying the publication of the platform paper until September because they have had a change of heart on banning cash rebates, this is a positive move.

If pushing back the publication of their platform paper results in platforms and advisers having less time to implement the final rules, and this includes having to find a viable alternative to cash rebates, then that is very disappointing news indeed.

Photo credit: Flickr/Yoshimai