Responding to yesterday’s FSA policy statement on platforms and the Retail Distribution Review (RDR), Mike Eaton, RDR lead partner at KPMG, commented:
“The long-awaited FSA policy statement has not provided the industry with the clarity they had hoped for. The paper gives some further details on re-registration and the provision of information to underlying investors but significant uncertainty remains over provider payments and cash rebates. The FSA states a clear desire to ban both product provider payments to platforms and cash rebates to customers. This announcement serves as a wake-up call for any platform providers who have been waiting for either clarity, or an about turn, from the FSA. Now is the time to plan for the banning of product provider payments and cash rebates.”
However, it is important to note that the FSA has stopped short of finalising any rules in this area for the time being, and plans to conduct more analysis on the customer impacts, as well as the timescales required for the industry to adapt to the changes. The FSA has also clarified that any rules on the banned payments will not come in to force until after 31 December 2012.
Commenting on what this means for platform providers, Mike Eaton continued: “Whilst the FSA will conduct more analysis it is important that platform providers do not interpret this as the FSA backing down on banning these payments. The FSA’s paper is clear on its desire to ban cash rebates in full and platform providers must ensure they themselves have a very detailed understanding of the impacts on their business model. Platform providers must consider how they will need to adapt their product and pricing strategies, operational processes and systems. In addition, they need to establish what a realistic delivery timescale looks like in order to deliver the changes required even though it looks like we are now more likely to see a phased approach to the introduction of RDR regulations.”
“Given the scale of RDR-related change that many platform providers are already in the process of undertaking - such as removing commission and facilitating adviser charges - there is a risk that platform providers may need to ‘dig the road up twice’ and incur significant additional costs should the FSA confirm a ban in the near future. It is therefore important that platform providers invest the time now in identifying the overlaps between the changes they need to make to their platforms for 31 December 2012, and the changes that would be required to comply with the anticipated ban on product provider payments and cash rebates in 2013 or beyond. This will enable platform providers to assess the risk of systems re-work, as well as put appropriate mitigation strategies in place where possible.”
Notes to editor
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