WIREDGOV

The Financial Services Authority (FSA) is consulting on proposals which would ensure that investors can make fully informed choices if they wish to consolidate their investments in one place on a platform and understand exactly what they are paying for this service.

At present, providers of investment products, such as investment managers, generally pay to have their products included on a platform. This cost is then passed on to the investor in the price of the product.  The proposed changes will make charges clearer to investors and increase competition in the market. Both investors and advisers will be able to compare the costs of investing through different platforms and make an informed decision on whether using a platform represents good value for money.

To make charges clear to investors, the FSA is proposing a ban on all payments from product providers to platforms. This would apply whether an investor using a platform is receiving advice from an investment adviser, or has made his or her own investment decisions. 

Sheila Nicoll, director of conduct policy at the FSA, said:

“Investors are increasingly using platforms as a convenient ‘one stop shop’ for their investments, but at the moment many investors have no idea what they are paying for this service, while some believe it is free.

“This needs to change. Today we are proposing changes that give investors and their advisers more control and mean that they know exactly what they are paying for a platform’s service.”

The FSA plans to publish its finalised rules on platforms before the end of 2012, allowing platforms over a year to implement the necessary changes to their business models before the rules come into effect on the proposed date of 31 December 2013.

The FSA is also seeking views on whether the ban on payments from product providers should be read across to the wider retail investment market, such as to life companies and Self-Invested Personal Pension (SIPP) operators.

Notes for editors

1. The Consultation paper: Payments to platform service providers and cash rebates from providers to consumers
2. The NMG Research and Deloitte Research.
3. This consultation paper follows on from Policy Statement 11/9 where the FSA set out its intention to ban payments from product providers to platforms and cash rebates paid to investors.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
5. The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 2012