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A new era for platform fees: What has changed?

Professional Adviser
Written By:
Professional Adviser
Posted:
Updated:
07/04/2014

New rules governing how fund supermarkets and platforms are paid were introduced on 6 April. So, what does the new world look like?

From 6 April this year, all platform services must be paid for by a platform charge “disclosed to, and agreed by, the consumer”.

Here, we run through all the key points investors need to know…

1 Just the bill, please

Platform providers must only be remunerated for the service they provide by ‘platform charges’ paid by the end investor, who must know all about it. Certain exemptions aside, financial advisers can no longer accept any money from product providers, such as a share of a fund’s annual management charge.

According to the Financial Conduct Authority (FCA), this change in particular will restrict the influence product providers and platforms have “on the promotion of one fund over another”.

It’s worth noting that not everyone agreed with this proposal. Indeed, a minority argued the current charging structures used by platforms that did not charge an explicit fee “were to the benefit of the consumer”.

2 Keep what you’ve got

The idea, obviously, is for payments from product providers to platforms to cease altogether. But what about all those agreements already in place before 6 April?

Well, to avoid what it said might be “operational challenges” for platforms, as well as the potential for any “undesirable” tax consequences for consumers, the FCA has included a transitional provision allowing platforms to continue to retain legacy payments from product providers for existing business subject to a two-year ‘sunset clause’ expiring on 5 April 2016.

3 A level playing field

Another rule change is that cash rebates to consumers are prohibited for all platform services. That means both advised and non-advised consumers.

Read our guide on how to pick a fund supermarket HERE.