Responding to the news report that suggested the FSA is considering a ban on unit rebates on platforms following discussions with HMRC, Mike Kellard, CEO of AXA Wealth, describes unit rebates as a ‘return to the bad old days’:
“I have long held the view that unit rebates are absolutely not viable as they create customer confusion and a lack of transparency. The RDR was designed around making things easy, and yet this move appears to be a ‘return to the bad old days’; in most cases consumers don't know what a unit is, let alone be able to calculate what a recurring unit rebate is on a range of different funds in different products with potential tax liabilities and tax thresholds. I would describe this potential move as a nightmare for the whole industry.
“Cash rebates in my mind still offer the best outcome for our clients, as they are easy to understand. While I appreciate that the argument to retain them is largely lost, I find it disappointing that we have been unable to find a practical way to ring-fence them to respond to the argument that the rebates could be used as a commission stream for advisers.
“If cash rebates are to be banned then it’s better to ban all rebates as consumers will never understand unit rebates in my view.
“Some commentators have suggested that an outright ban on all rebates may impact the competitiveness of platform offerings. I am not sure if this is the case. I think it will mean that competitive forces work better across the market, and funds will need to compete with each other and price competitiveness in the round will form a key part of this.
“In my view the impact on platforms in absolute terms therefore is minimal as we will seek to provide access to the most cost effective share classes available as we do today, but without the added complexity of rebates. These clean share classes will dominate future advice points and will provide the cleanness and transparency that the customer and the regulator requires.”
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