Wednesday, 31 July 2013 15:02
AXA Wealth welcomes FCA clarification on the cash rebate ban
AXA Wealth has praised the FCA for promising to review its plans to ban cash rebates to retail clients on platform legacy business.
The Financial Conduct Authority's platform paper set out a ban on platforms being funded from fund manager rebates and for the payment of cash rebates to clients from April 2014.
Legacy business was required to move away from this form of bundled charging after a further two-year period ending in 2016, but a similar transition period was not given for existing business where cash rebates are being passed to clients instead of being retained by the platform.
AXA Wealth, an IFP Corporate Member, had previously warned this could create an unlevel playing field during this two year transition and penalise firms acting more in the spirit of the RDR. The FCA has now made clear that cash rebates to retail clients on legacy business can continue indefinitely, unless there is a change to the investment, and will set out more detail in a consultation document in September.
Mike Kellard, CEO of AXA Wealth, said: "We are pleased the FCA has listened. The issue of cash rebates on legacy business needed clarifying and we look forward to further detail and consultation in September.
"It always seemed strange for the platform paper to allow a platform that wants to keep the rebate for itself to be able to continue doing so for another two years but those who want to return the rebate to the customer must stop doing so by April 2014. This appeared to be an unintended consequence of the platform paper, and it is right the FCA is seeking to clarify its stance.
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"With more than 50 per cent of flows going into the 2,500 clean share classes available on the Elevate platform we firmly believe this is the future for the industry. However, the clarification of the rules surrounding cash rebates will ensure a level playing field for all platforms and allow a more orderly transition to the new charging structure for legacy business. The key is to give advisers, and their clients, choice about when to move legacy assets to new share classes. We will need to wait and see what impact this change of timing has on the overall shift away from rebates for legacy assets.
"We fully support the introduction of explicit charges for platform services but this should be done in a uniform way, not in a way that will disadvantage those providers, advisers and clients that have embraced a transparent approach."
The Financial Conduct Authority's platform paper set out a ban on platforms being funded from fund manager rebates and for the payment of cash rebates to clients from April 2014.
Legacy business was required to move away from this form of bundled charging after a further two-year period ending in 2016, but a similar transition period was not given for existing business where cash rebates are being passed to clients instead of being retained by the platform.
AXA Wealth, an IFP Corporate Member, had previously warned this could create an unlevel playing field during this two year transition and penalise firms acting more in the spirit of the RDR. The FCA has now made clear that cash rebates to retail clients on legacy business can continue indefinitely, unless there is a change to the investment, and will set out more detail in a consultation document in September.
Mike Kellard, CEO of AXA Wealth, said: "We are pleased the FCA has listened. The issue of cash rebates on legacy business needed clarifying and we look forward to further detail and consultation in September.
"It always seemed strange for the platform paper to allow a platform that wants to keep the rebate for itself to be able to continue doing so for another two years but those who want to return the rebate to the customer must stop doing so by April 2014. This appeared to be an unintended consequence of the platform paper, and it is right the FCA is seeking to clarify its stance.
{desktop}{/desktop}{mobile}{/mobile}
"With more than 50 per cent of flows going into the 2,500 clean share classes available on the Elevate platform we firmly believe this is the future for the industry. However, the clarification of the rules surrounding cash rebates will ensure a level playing field for all platforms and allow a more orderly transition to the new charging structure for legacy business. The key is to give advisers, and their clients, choice about when to move legacy assets to new share classes. We will need to wait and see what impact this change of timing has on the overall shift away from rebates for legacy assets.
"We fully support the introduction of explicit charges for platform services but this should be done in a uniform way, not in a way that will disadvantage those providers, advisers and clients that have embraced a transparent approach."
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