• Has the platform moved to an explicit charging structure and passed any rebates from providers in the form of cash (within the de minimis limits) or in the form of additional units.
As you would expect, the upturn in popularity of platforms has also instigated an upturn in interest from the FCA. The regulator’s guidance paper in 2013 gave a good indication of what its areas of focus would be, its major concerns and a broad picture of what it was expecting from advisers. It will necessitate some work from advisers to stay compliant.
Gary Kershaw is group compliance director at SimplyBiz
Key issues: FCA and platforms
Gary Kershaw from SimplyBiz notes that in the Financial Conduct Authority’s guidance paper on platform-related advice, it raised three ‘key issues to consider when giving advice on platforms’, which are as follows:
1. The client incurred additional costs without good reason: Advisers need to consider all costs, including the combined cost of funds, products, platform and advice (initial and ongoing).
2. Investments did not match the client’s attitude to risk (ATR): A recommendation must be suitable for the client given their ATR and personal and financial circumstances. Advisers are also responsible for the advice when using financial planning tools provided by the platform.
3. The advice led to lost benefits/guarantees or a financial loss for switched investment without good reason: Advisers must review existing investments in the light of the client’s circumstances, needs and objectives and only recommend a switch when it is in the client’s best interest. There have to be clear benefits for the client, not the firm.
Platform charges: the sunset clause
In its paper on ‘Payments to platform service providers and cash rebates from providers to consumers’, the FCA outlines the details of when platform charges become payable.
It states that initially, it had consulted on rules that would require all platforms to charge for all business from December 31 2013, regardless of when business was placed.
But it recognises this was “potentially tax inefficient”, while moving all assets to a platform-charging basis within a year from the confirmation of the final rules would have been “operationally challenging”.
Instead, it states: “We are therefore extending the timescale for when a platform charge should become payable for legacy business until April 6 2016.
“To avoid operational challenges for platforms, as well as the potential for any undesirable tax consequences for consumers, we have included a transitional provision allowing platforms to continue to retain legacy payments from product providers for existing business on the platform, subject to a two-year sunset clause (expiring on April 5 2016).”
