In June the FSA ran a consultation on the issue of payments to platforms and outlined new plans that are designed to ensure that platforms are not influenced by payments they receive from financial product providers and fund managers.
Platforms providers are split on the plans, though, with some urging the FSA to relax some of its rules and another urging the regulator to "stick to its guns".
Cofunds and Fidelity FundsNetwork are lobbying the City regulator in a bid to get it to relax proposed rules that would ban platforms from receiving payments for anyone other than clients in order to allow fund managers to pay them under certain circumstances, according to a report by MoneyMarketing.
Cofunds chief executive Martin Davis has claimed that platforms are now performing some "functions" that fund managers "used to carry out" and said that, as a result, platforms should "receive remuneration for that" from fund managers.
However Bill Vasilieff, chief executive of Novia, told Out-Law.com that he was "very much against" the FSA relaxing its position on the issue which it outlined in June.
"In the spirit of transparency and unbundling [of charges] allowing any sort of payment will lead to conflicts of interest," Vasilieff said. "Ultimately the charges fall on the clients anyway. The FSA should stick to its guns. The whole idea of the FSA's reforms is that they are aimed at improving transparency [including] over platforms charging customers for what they do."
Fidelity Worldwide Investment head of business development Ed Dymott has also urged the FSA to relax its approach and told Money Marketing that any payments between fund managers and platforms would "obviously" be "disclosed in full". However, Vasilieff rejected those claims.
"For years and years fund supermarkets have been trying to hide the arrangements between themselves and the fund managers and have refused to disclose any details about them. For them to now come out along and say that the arrangements would be made transparent is laughable," he said.
Davis said that platforms providers deserved payment because they were doing some of the work previously carried out by fund managers.
"Things such as client notifications and corporate actions are now carried out by platforms because they have the economies of scale," Davis said, according to the MoneyMarketing report. "If we carry out roles which save fund managers time and money then we should be able to be paid for that. It is a point we are making to the FSA (Financial Services Authority) and have been doing for over a year."
That view was supported by Ed Dymott of Fidelity, who said that the firm had also been in "dialogue" with the FSA on the issue.
"We are talking to the FSA about whether certain activities should be out of scope of the payment ban," Dymott said. "Obviously any payments that are made would be disclosed in full."
"We feel that payments for corporate actions, fund listing, manual processing, charges for dealing errors and marketing activity should be allowed. If a platform is putting on an event and that cost was charged back to a fund manager it does not seem like it is creating significant challenges to the market. Any of these payments would be covered by the FSA’s inducement powers," Dymott said.
Vasilieff said that the fund manager charge should "reflect that" fact and the FSA should not move from its position that payments to platforms should only come from clients.
The FSA's proposals will restrict platforms to obtaining only payment of charges agreed with consumers. The FSA also announced that it would ban product providers from issuing cash rebates to consumers' platform accounts under a drive to increase transparency and eliminate 'product bias' in the platforms market. It intends to bring the new rules into effect on 31 December 2013.
The regulator said that the proposals would lessen 'product bias' in the market.
"Products offered by providers who are unwilling or unable to pay a rebate to the platform from the product charge would not have their products available to the clients of that platform," it said. "When a platform has been able to negotiate a higher rebate from a fund manager for a particular fund, this is often linked to greater marketing activity being carried out for the fund, with more prominence given to that fund by the platform. In effect, the higher rebate is being used to help secure greater distribution."
Changing the rules would remove the potential that product provider payments influence the range of products hosted on a platform, the regulator said. It added that research conducted on its behalf indicated that consumers do not view platform charges as unfair when they are clearly disclosed.
Under the FSA's Retail Distribution Review (RDR) rules platforms are required to present their products in an "unbiased manner" and they must also "meet the same standards as product providers when they facilitate adviser charging." Platforms are also required to "disclose any fees or commission offered to them by third parties in advance of providing a service to customers."
