CP10/29 and PS11/9 RDR & Platforms

Following on from a review of general disclosure in CP 11/03 and PS 11/14, the demands placed on platforms and IFA firms also look heavy from a reading of PS11/9 which contains final rules from CP10/29 entitled ‘Delivering the RDR and other issues for platforms and nominee-related services’.

Specific requirements are:

  • Cash rebates by platforms will be banned by 31st December 2012 (indeed no rules will be enforced until this point)
  • Execution-only platforms will be caught up in the same requirements for increased transparency and unbundling of pricing as other wrap platforms. They will need to disclose fees or commissions received from third parties
  • Payment of fees from platform users’ cash accounts rather than via unit rebates is favoured by the FCA but no ruling has been declared in this area yet
  • More positively for IFAs, they will be saved from having to artificially spread their customers’ assets across a range of platforms to meet the independence rule
  • But they must assess whether being on a platform is in each client’s best interests
  • Advisers must be able to demonstrate why a particular platform is suitable, in other words choice of platforms and off platform solutions need to be considered alongside each other for all clients
  • So although, in theory, a firm may be able to use a single platform for the majority of clients; in reality IFAs need to consider carefully whether one single platform is definitely in the best interests of all clients. So suddenly, client asset migration onto platform does not look necessarily as quick and easy a process as it initially sounds.

A reading of this Policy Statement does leave you asking the question: is the FSA dithering in too many contentious areas and putting off final decision-making until next year? This may be because the institution is going through wide scale change itself as the FSA splits into The Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) and the harder focus of the FCA which now regulates IFAs.

No doubt further Disclosure updates will follow in the near future as slowly but surely all corners of the industry get clarity on what RDR really means in terms of what types of communication customers will need to receive and what safeguards will need to be applied to ensure they are treated fairly. Let’s hope the new FCA leaves enough time for providers and platform operators to make the necessary changes before the RDR comes into force.

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