The FSA has indicated it is leaning towards abolishing all payments to platforms from product providers.
In the FSA's platform discussion paper today,the FSA has identified several options for platform remuneration with respect to advised retail investment business.
- no changes
- The current practice of product providers paying platforms is allowed to
continue.
- stop all payments from product providers to platforms.
The FSA says it prefers the final option. However, this it is not a final view.
"If platform charges and product provider charges are separated, consumers can judge the value of the services they are being provided with more easily," the discusson paper reads.
"If a fund manager reduces its charges, the customer is likely to benefit directly from this.
"Any increases in platform charges will be clearly visible to its customers and their advisers. With a bundled charging model this may not be apparent.
"We understand that the cost of additional services provided through platforms can absorb any reduction in fund management charges negotiated by platforms. Accordingly the total charge payable by the customer tends to remain the same."
The FSA says it could make it compulsory for platform operators to fully disclose the income they will receive from product providers.
"Platforms using the fund supermarket model would incur additional compliance costs to produce the necessary disclosure documents and to modify their systems to provide the necessary information to consumers," it says.
"A more transparent pricing model would incentivise platforms to pass on efficiency savings to consumers more quickly. Although, making the payments more visible may act as a disincentive for product providers to provide platforms with larger payments."
