From 6 April 2016 the FCA's rulings will come into effect regarding how platforms should be paid for assets they hold on behalf of clients. This will have complex implications for platforms and advisers to consider:
Standard Life Wrap platform is ready for these requirements and has become the first scale platform in the UK to move entirely to unbundled (clean) mutual fund share classes for both new and existing clients.
What the sunset clause means for clients and commission
What the sunset clause means for individual client arrangements very much depends on how the platform originally charged the client for its services. In broad terms there are three categories:
Existing arrangement |
Impact on platform charges |
Impact on investment charges and tax treatment |
Impact on adviser remuneration |
Fully bundled AMC (investment, platform and advice) |
Must be fully unbundled. Client must agree to new charge |
Pay fund manager rebate in units. Basic tax applied at source (additional tax paid on client tax return)
OR Convert to unbundled share class (rebates not required and additional tax liability removed) |
Trail commission likely to stop (no longer funded by a rebate) |
Explicit platform charge and Fully-bundled AMC |
No change (platform charge already agreed by client) |
As above |
As above |
Explicit platform charge invested in unbundled share class |
No change (platform charge already agreed by client) |
No change
(assets already rebate-free. No additional tax liability payable) |
No impact |
Business threat or opportunity?
It’s tempting to view the sunset clause purely as a threat, but like RDR, it will create opportunities to make client relationships more modern and sustainable.
Next steps
The pressure on revenues is likely to grow as the deadline approaches, so it is essential to start planning now. Wherever revenue from a client is at risk, there are three potential options:
Our Wrap platform is fully 2016 ready and we have a range of asset migration support in place ready to help protect your revenue going forward.