New fee arrangements for online investment platforms welcomed

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Investment companies have welcomed the Financial Services Authority proposal to alter the way ‘platforms’ for investment portfolios are paid for.

Platforms, online services used by financial advisers or by retail investors, where a client’s portfolio of several funds are managed in one place, have become increasingly popular, replacing a process where each fund group was dealt with separately.

The Association of Investment Companies (AIC) said the move where clients pay the platform directly, rather than platform services being paid for product providers, will be fairer to the consumer, or the financial advisers.

AIC director general Ian Sayers said: “The FSA’s intention will create a win-win for consumers.

“Greater transparency will empower consumers and reduce the risk that competition could be distorted by providers buying access to distribution.

Whether consumers choose to buy through advisers or directly, they will benefit from a clean pricing model where they see how much they pay for advice, the fund and the platform they use.

This model will encourage platforms to hold the broadest range of investment products, including investment companies which have not paid for access in the past.

“It will also ensure platforms are better able to help independent advisers fulfill their own obligations to review the whole of market when helping their clients build a portfolio.

“As many platforms have already developed a clean pricing option in anticipation of such changes, the deadline of December 2013 should not present a problem.”

The AIC says the FSA proposals deliver recommendations it has been promoting including:

n Preventing platform services from being paid for by product providers.

n The FSA expects these charges not to vary inappropriately for substitutable competing products held on the platform.

n Cash rebates from product providers to consumers will be banned. The AIC says this prevents the possibility that rebates could be used to pay for advice and, in effect, act as a proxy for commission.

n Ban on payments from product providers and cash rebates will apply to adviser and non-advised platforms.

The FSA proposes the rules should come into force on December 31, 2013.