Surveys
Most UK Advisors Want Platform Rebates Paid To Clients In Fund Units, Not Cash - Poll
A majority of UK financial advisors recently polled by Skandia say that rebates made by platform providers should be passed back to clients as additional units into their investments rather than paid as cash.
Some 52 per cent of advisors said rebates in the form of additional units was the best option, according to Skandia’s latest Adviser Confidence Barometer, which is drawn from 1,700 advisors. They were polled in the second quarter of 2011.
At present, a customer pays the annual management charge of the retail fund he or she buys – say 1.5 per cent – but when a fund is distributed via a platform, part of that charge is paid back to the platform. Some of that money is kept by the platform provider and the rest is rebated to an advisor. Under the UK’s Retail Distribution Review programme of reforms, the entire rebate must go to the customer. There remains a debate over whether it goes back in cash or a unit.
Only 25 per cent of advisors opted for cash rebates, with 21 per cent saying they do not mind how platform rebates are paid. The advisors surveyed were not necessarily users of the Skandia platform.
The FSA recently confirmed its preference for rebates to be passed back to customers in the form of additional units but has delayed the final rules in order to carry out further research on the impact unit rebates will have on the business models of platform operators.
“Investors use platforms to invest in funds, not cash, so it follows that a discount that is negotiated by their platform operator should be credited back into the fund rather than the cash account, Skandia said.
“Financial advisors are ideally placed to judge what is in the best interests of their customers so the results of this survey must be an important consideration. We have carried out significant preparatory work and see no logistical reason why platform operators would not be able to support unit rebates as long as they are prepared to make the necessary investment in updating their systems,” said Graham Bentley, head of proposition at Skandia.