Platform reforms inconsistent with RDR, says Cofunds

Cofunds has criticised the reforms outlined in the Financial Service Authority’s (FSA) discussion paper on platforms, saying the proposed rule changes represent a shift away from the retail distribution review’s core objectives.

The fund supermarket has published a White Paper entitled “RDR and fit for purpose platforms” which looks to trigger further debate around the issues raised in the FSA’s DP10/2 discussion paper.

The paper says: “If the proposed reforms are implemented, Cofunds is highly sceptical that the FSA will successfully achieve its outcomes for RDR—indeed, we remain unclear about whether the desired outcomes have now changed and more fundamentally what specific problems DP10/2 is looking to address.” (article continues below)

Brett Williams, chief executive at Cofunds, says: “We agree with the wider RDR objectives of transparency and customer engagement. But we think the FSA has moved away from those with the latest discussion paper.”

“I don’t think the FSA needs to legislate for something that is being driven by the market anyway”

On the proposed plans to ban rebates and move towards an unbundled pricing structure across all platforms, Williams says there is no evidence of any bias caused by operating a bundled or unbundled pricing structure.

Cofunds, Fidelity FundsNetwork and Skandia Investment Solutions, who together control three-quarters of the platform market, plan to offer both bundled and unbundled pricing.

Williams says: “It should be a test of suitability. The FSA should take that into account rather than use a sledgehammer to crack a nut.

“I don’t think the FSA needs to legislate for something that is being driven by the market anyway.

“The biggest issue for me is that out of this process we don’t make it more expensive and more complicated for the end investor.”