FSA set to ban payments to platform services

The FSA are set to ban payments to platforms received from service providers in the UK. This has triggered reaction that any such reforms could cost consumers $30million.

The discussion papers, recently released by the FSA,  outline the proposals with a rather clumsy title barely warning readers about the hard hitting recommendations. Australian wealth sector reforms are far exceeded by the UK version.

The report notes that the current system in which consumers pay for platform services is potentially negative to the market. For an industry where, in the past, payments to aligned distributors have been at the core of a business model, this becomes even more confronting.

Previous changes in the RDR (Retail Distribution Review) seem to be in line with the FSA in the fact that providers of products should not be allowed to buy distribution.

The reforms are expected to impact the way in which wealth businesses operate in the UK, acknowledged the FSA. They went on to say that consumers should be totally aware of any costs associated with using a platform and that it should be the consumer that bear them.

Many platforms are changing their revenue and fee models already, noted the FSA whose reforms are expected to be effective from the end of this year. The reforms have been supported by the Conservative government.

Skandia, the UK wrap provider, believe that their market segment would be hit hard by the reforms, however they are in support of the FSA’s policy initiative, the IFAonline.com news service has reported.

For the time being life insurance companies will remain exempt from any reforms, pending consultations. Hargreaves Lansdown, the discount broker, is reported to have said that $30million in extra costs would be imposed by the reforms. The FSA consultation has split the reaction of the wealth industry.