FCA sets out new rules for the platforms industry
Platforms have historically come up with inventive ways of charging, or seemingly not charging consumers.
The result being that not only is it difficult for consumers to work out the charges, but also the process of comparing prices and products available on different platforms can be challenging.
In short, the current charging system used by platforms often lacks transparency and causes confusion.
In June 2012 the FSA published Consultation Paper (CP) 12/12 "Payments to platform service providers and cash rebates from providers to consumers". This CP consulted on changes to how platforms would be paid (in both the advised and the non-advised sector).
The FSA also proposed preventing platforms in the non-advised market from passing on rebates to consumers in case.
Having completed the consultation process the FCA issued its Policy Statement (PS) PS13/1 setting out the proposed new rules on how platforms will be funded. The new rules are intended to support the FCA's objectives of:
- Securing an appropriate degree of protection for consumers;
- And promoting effective competition in the interests of consumers.
The FCA has confirmed that it intends to proceed with its core proposal which requires platform services to be paid for by a platform charge, disclosed to, and agreed by, the consumer. The new rules will also see cash rebates for non-advised platforms banned to prevent such rebates being used to disguise the costs of the platform charges.
The FCA has said that this ban would not prevent consumers from being able to receive cash rebates which have a value of £1 or less per month for each fund held on the platform, as this would be unlikely to offset any adviser or platform charges.
The ban would also not prevent a platform from receiving a rebate from a fund manager in cash, provided this is passed on in full to the consumer in additional units.
The outcome of these new rules will see product providers' influence over platforms restricted and the risk of potential product bias reduced.
The FCA did amend some of its rules to take into account feedback received during the consultation process to allow payments:
- For the work incurred correcting a pricing error by the product provider;
- For the work incurred in dealing with a corporate action by the product provider;
- For the work incurred in providing the product provider with management information regarding the consumers who are invested in the product; and
- In relation to advertising products on the platform.
The new rules will come into force on 6 April 2014 but platforms will have two years to move existing customers to the new explicit charging model.
The FCA has also said that it is considering imposing similar rules in adjacent markets and has highlighted the execution-only and self-invested personal pension plan markets as part of its ongoing work.