FSA promises to end payments between fund firms and platforms

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The Independent Online

Payments between fund management companies and firms that sell funds to the wider public are to be banned.

The Financial Services Authority, in its review of platforms (the firms that sell funds to the public), says that it would like the paying of commission to end in order to increase transparency and reduce costs to the public.

In the case of one leading platform, they receive on average 0.75 per cent of the amount invested by their customers in a payment from the fund management firm. Only about a fifth of this is passed back to customers in a loyalty bonus.

Industry experts say that the FSA's decision could lead to consumer getting a better deal. "We'd expect to see overall costs fall over time as there will be more scrutiny on each element. Platforms will compete on service, functionality and price, while fund managers will compete on price and performance," said David Ferguson of Nucleus, (left) a relatively new entrant in the platform sector. "Transparency can only be in the consumer's interest and that is why we welcome the FSA's stance."

Fellow platform provider Alliance Trust has also welcomed the move. Its chief executive Robert Burgess said it would mean "financial advisers and clients would be fully aware of the charges.". However, there is no date set yet.