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Platform rebates should be units rather than cash, say advisers


The majority of financial advisers (52%) think platform rebates should be passed back to customers in the form of additional units into their investments, rather than cash into their cash account. The figures from Skandia’s latest Adviser Confidence Barometer* show that only 25% of advisers opted for cash rebates with 21% saying they do not mind how platform rebates are paid. The advisers 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. Skandia says it is right and important to ensure the final decision can be supported by the platform market but insists that ultimately it is customer needs that must prevail.  
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. This will also ensure customers benefit from compound investment growth on the rebates they receive from their platform provider. This could account for an additional GBP2,000 on a GBP100,000 investment over 10 years.  
Graham Bentley (pictured), head of proposition at Skandia, says: “Financial advisers 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. The decision that is made now will define the platform market for years to come so it is essential that the best interests of customers prevail over the short term impact on platform business models.”

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