Platform paper puts consumers in the driving seat

Ian Sayers, director general of the AIC, has welcomed the FCA's long-awaited rules outlining how platforms can be paid going forward.

Platform paper puts consumers in the driving seat


Sayers said end consumers were "finally in the driving seat" regarding fund charges and would demand better value than they might before the RDR.

He said he was looking forward to fairer comparisons between closed- and open-ended funds in a post-commission world.

In his recent blog, Sayers said while it was encouraging to hear that platforms will soon have to be paid for explicitly by the customer rather than the product provider, he expressed frustration that the process has been such a "long and winding road" to get to where it is now.

"To someone outside the financial services sector, the whole debate about rebates must have seemed like something from another world, with people arguing so hard about maintaining a system where a customer gives money to a management group, just for the management group to give it straight back to the customer," he said.

The FCA set out its Policy Statement 13/1 last month, in ‘Payments To Platform Service Providers And Cash Rebates From Providers To Consumers’.

Rebates to consumers will be banned on new business from next April, while for legacy business this will be turned off in April 2016.

Sayers said: "In some ways the final death knell for rebates came via the intervention of HM Revenue & Customs, who declared that both cash and unit rebates are taxable as income. Some might consider them an unlikely hero in all this, but in some ways it’s an inevitable consequence of building such a counterintuitive system in the first place."

He said transparency alone has never resolved the problem of commission bias, as best demonstrated by using the investment company sector as a case study.

"With commission also a thing of the past, customers will now see exactly what they are paying for advice, the platform and the fund. Products like investment companies, which are restricted in paying commission and platform charges, will be able to compete much more on their own merits," he said.

Sayers added: "One of the RDR’s lasting impacts is that customers should now be able to see exactly what they are paying for. Time and again, research has shown that, when costs are bundled, consumers tend to do poorly. This is not just because they are unable to shop around for the best price on each element. It also makes consumers less likely to demand higher standards. If you perceive something as being ‘free’, you are much less likely to complain about what you are being offered than if you can see how much you are paying for it."



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