Barely had the ink dried on the FCA’s policy statement PS13/1 governing how platforms deal with rebates than the floodgates opened with a variety of views as to what the changes will mean for our industry.
Having seen this debate play out in the press in the past two weeks, what we should make of the regulator’s conclusions seems clear to me – transparency is the only way forward. And whatever different parties have to say on PS13/1 this drive for openness can only be good news for end investors, the very group the Retail Distribution Review was designed to benefit.
But rather than coming as a bolt from the blue, the landscape has rightly been changing in favour of investors for some time, meaning that more than ever before they now have a clear picture of what they are paying for across the value chain.
For some time now all regulatory roads have led to clean, therefore it’s been disappointing to see that the industry as a whole didn’t embrace them before now. Doing so would have gone some way to simplify the post RDR world. For me the precursor to PS13/1, the surprise announcement by HM Revenue & Customs at the end of March that rebates are to be taxed at source, was all the proof that the industry needed that the future’s clean.
While overall PS13/1 will be good for end investors there will clearly be some short-term pain for the industry.
The pain will be felt across the board but the degree to which any platform suffers will heavily depend on the how far it has already embraced clean and transparent pricing.
We’re well positioned but we need the rest of the industry, including the fund managers and third party administrators, to be on the same page on share class conversions otherwise the end investor will lose out. As an industry we need to work far more collaboratively to get the best result for the end investor and by association for financial advisers.
The regulator has rightly been pushing for transparency and clean share classes is the best way to meet regulatory expectations in the true spirit of RDR, not just the letter of it. If end investors can’t see who’s getting what, they understandably presume everybody’s getting fat. Everyone needs to embrace clean share classes and they need to do it now.
We launched our explicit pricing model in September 2012 with more than 1,700 clean share classes. We now have more than 2,700 clean share classes on the platform and are committed to have 3,000 by July. We made the decision to push ahead with clean share classes – in the face of some opposition it has to be said – because it is best for end investors. In addition, we didn’t think it fair not to signpost our intentions for the business at the earliest opportunity, rather than dragging our feet waiting for the regulator to confirm the inevitable.
